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What changed in IMMERSION CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of IMMERSION CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+267 added−202 removedSource: 10-K (2023-02-22) vs 10-K (2022-02-25)

Top changes in IMMERSION CORP's 2023 10-K

267 paragraphs added · 202 removed · 158 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeAdditionally, we will provide technical leadership within the haptics ecosystem and align supply side haptics solution providers on consistent specifications to reduce friction related to the integration of haptics into license bearing products through participation in industry bodies and targeted standards setting organizations (“SSOs”).
Biggest changeAdditionally, we will provide technical leadership within the haptics ecosystem and align supply side haptics solution providers on consistent specifications to reduce friction related to the integration of haptics into license bearing products through participation in industry bodies and targeted standards setting organizations (“SSOs”). 6 Table of Contents Expand Markets and Applications : Work closely with component suppliers, chip vendors, systems integrators, content enablers and other partners to broaden the use of haptics within our current core markets and to expand it into emerging markets, such as virtual and augmented reality.
Haptics and Its Benefits While the digital world offers many advanced technologies and capabilities, it often fails to provide us with the meaningful touch experiences that inform and enrich our real-world interactions.
Haptics and Its Benefits While the digital world offers many advanced technologies and capabilities, it often fails to provide us with meaningful touch experiences that inform and enrich our real-world interactions.
We believe that our IP is relevant to many of the most important 8 Table of Contents ways in which haptic technology is and can be deployed, including in connection with mobile interfaces and user interactions, in association with pressure and other sensing technologies, related to virtual and augmented reality experiences, and in connection with advanced actuation technologies and techniques.
We believe that our IP is relevant to many of the most important ways in which haptic technology is and can be deployed, including in connection with mobile interfaces and user interactions, 7 Table of Contents in association with pressure and other sensing technologies, related to virtual and augmented reality experiences, and in connection with advanced actuation technologies and techniques.
We employ a consolidated direct sales force in the United States and Asia to license our patents and other technology across our target markets and augment that sales force via partnerships and licensing agreements with component suppliers and system integrators. Additional information about significant customers is incorporated herein by reference to Note 12.
We employ a consolidated direct sales force in the United States and Asia to license our patents and other technology across our target markets and augment that sales force via partnerships and licensing agreements with component suppliers and system integrators. Additional information about significant customers is incorporated herein by reference to Note 11 .
Our reference technologies include source code for host and embedded product development and are intended to accelerate adoption of licensed technologies by our licensees. Software and firmware: We offer software and firmware for OEMs and supply chain partners to integrated advanced haptic capabilities and optimize system performance.
Our reference technologies include source code for host and embedded product development and are intended to accelerate adoption of licensed technologies by our licensees. Software and firmware: We offer software and firmware for OEMs and supply chain partners to integrate advanced haptic capabilities and optimize system performance.
Our strong patent position generally makes us unique in the market in that we may lose a software licensing opportunity, for example, to a competitor or in-house team but still secure a patent license when haptics are used.
Our strong patent position generally makes us unique in the market in that we may lose a software licensing opportunity, for example, to a competitor or in-house team but still secure a patent license when haptics is used.
To retain these high caliber employees, we strive to create an environment and culture that fosters and supports the continued adoption of our technology in our core markets where we see further licensing opportunities. 11 Table of Contents
To retain these high caliber employees, we strive to create an environment and culture that fosters and supports the continued adoption of our technology in our core markets where we see further licensing opportunities. 10 Table of Contents
We continue to pursue intellectual property that aligns with our business strategy while efficiently managing our patent prosecution and maintenance costs. Our portfolio includes more than 1,600 worldwide issued or pending as of December 31, 2021, which support our technology offerings, protect our business activities and prospects, and represent an important independent licensing and revenue channel for us.
We continue to pursue intellectual property that aligns with our business strategy while efficiently managing our patent prosecution and maintenance costs. Our portfolio includes more than 1,200 worldwide issued or pending as of December 31, 2022, which support our technology offerings, protect our business activities and prospects, and represent an important independent licensing and revenue channel for us.
Foster Haptic Standards : We intend to lead and participate in the creation of ecosystem wide standards that will enable accelerated adoption of haptic technologies across our core markets.
Foster Haptic Standards : We intend to participate in the creation of ecosystem wide standards that will enable accelerated adoption of haptic technologies across our core markets.
Our licenses enable our customers to deploy haptically-enabled devices, content and other offerings, which they typically sell under their own brand names. We and our wholly-owned subsidiaries hold more than 1,600 issued or pending patents worldwide as of December 31, 2021.
Our licenses enable our customers to deploy haptically-enabled devices, content and other offerings, which they typically sell under their own brand names. We and our wholly-owned subsidiaries hold more than 1,200 issued or pending patents worldwide as of December 31, 2022.
Our licensees currently include some of the top makers of mobile devices in the world, including Samsung, Google, Sony, Panasonic, as well as integrated circuit manufacturers such as Awinic.
Our licensees currently include some of the top makers of mobile devices in the world, including Samsung, Google, Sony, Panasonic, as well as integrated circuit manufacturers such as Awinic and Dongwoon Anatech.
We have adopted a business model under which we provide advanced tactile software, related tools and technical assistance designed to integrate our patented technology into our customers’ products or enhance the functionality of our patented technology, and offer licenses to our patented technology to our customers.
We have adopted a business model under which we offer licenses to our patented technology to our customers and offer our customers enabling software, related tools and technical assistance designed to integrate our patented technology into our customers’ products or enhance the functionality of our patented technology.
Research and Development Our success, in part, depends on ensuring that our patents and other intellectual property continues to be relevant in our core markets in a manner that aligns with our business strategy while efficiently managing our costs. For the years ended December 31, 2021, and 2020, our research and development expenses were $4.2 million and $5.0 million, respectively.
Research and Development Our success, in part, depends on ensuring that our patents and other intellectual property continue to be relevant in our core markets in a manner that aligns with our business strategy while efficiently managing our costs. For the years ended December 31, 2022, and 2021, our research and development expenses were $1.4 million and $4.2 million, respectively.
Drive Adoption: Communicate the advantages of our patented innovations and technologies to the relevant customers in target end-markets and encourage their adoption through demonstrations, incorporation in the offerings of world-class companies and participation in SSOs.
Our strategy is founded upon the ability to: Drive Adoption: Communicate the advantages of our patented innovations and technologies to the relevant customers in target end-markets and encourage their adoption through demonstrations, incorporation in the offerings of world-class companies and participation in SSOs.
Patent Licenses Through more than 26 years of innovative research, development and business activity, we have built a far-reaching and deep portfolio of patents covering many of the foundational aspects and commercial applications of haptic technology.
Patent Licenses Through almost 30 years of innovative research, development and business activity, we have built a far-reaching and deep portfolio of patents covering many of the foundational aspects and commercial applications of haptic technology.
Our strategy is founded upon the ability to: Innovate: Develop and patent our innovative technology, in a targeted and cost-efficient manner, to provide haptics in mobile, gaming, automotive, wearable, virtual and augmented reality, and other products and services to transform user experiences with unique and customizable tactile effects.
Innovate: Develop and patent our innovative technology, in a targeted and cost-efficient manner, to provide haptics in mobile, gaming, automotive, wearable, virtual and augmented reality, and other products and services to transform user experiences with unique and customizable tactile effects.
Of these, 22, or 85%, were located in the United States and Canada. We rely on the skills and talent of our employees to successfully execute our strategy through ongoing innovation, licensing activities, and collaboration with customers and partners to ensure that high-quality tactile experiences are brought to market.
We rely on the skills and talent of our employees to successfully execute our strategy through ongoing innovation, licensing activities, and collaboration with customers and partners to ensure that high-quality tactile experiences are brought to market.
Our primary business is currently in the mobility, gaming, and automotive markets, but we believe our technology is broadly applicable and see opportunities in evolving new markets, including entertainment, social content, virtual and augmented reality, and wearables, as well as residential, commercial, and industrial Internet of Things.
Our primary business is currently in the mobility, gaming, and automotive markets, but we believe our technology is broadly applicable and see opportunities in evolving new markets, including virtual and augmented reality, and wearables, as well as residential, commercial, and industrial Internet of Things. In recent years, we have seen a trend towards broad market adoption of haptic technology.
Revenue generated from OEMs and integrated circuit customers in the mobile communications market, as a percentage of our total revenue, in 2021 and 2020, were 60% and 69%, respectively, of our total revenue. Gaming and VR: We have licensed our patents directly to Microsoft, Sony and Nintendo for use in their console gaming products.
Revenue generated from OEMs and integrated circuit customers in the mobile communications market, represented 60% of our total revenue in each of the years ended December 31, 2022 and 2021. Gaming and VR: We have licensed our patents directly to Microsoft, Sony and Nintendo for use in their console gaming products.
These items are also available to any stockholder who requests them by calling +1 408.467.1900. The SEC maintains a website that contains reports, proxy, and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov . Employees As of December 31, 2021, we had 26 full-time equivalent employees located in 4 countries.
These items are also available to any stockholder who requests them by calling +1 408.467.1900. The SEC maintains a website that contains reports, proxy, and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov .
In recent years, we have seen a trend towards broad market adoption of haptic technology. As other companies follow our leadership in recognizing how important tactile feedback can be in people’s digital lives, we expect the opportunity to license our IP and technologies will continue to expand.
As other companies follow our leadership in recognizing how important tactile feedback can be in people’s digital lives, we expect the opportunity to license our IP and technologies will continue to expand.
Litigation against unlicensed third parties is a last step after all other avenues for resolution have been exhausted. If unlicensed parties continue to ship products that use our IP without fairly remunerating us, litigation may be a proper step to protect our IP and assets, as well as protecting the investments of our existing licensees.
If unlicensed parties continue to ship products that use our IP without fairly remunerating us, litigation may be a proper step to protect our IP and assets, as well as protecting the investments of our existing licensees. As haptics gain wider acceptance in the market, the likelihood of unlicensed use of our IP increases.
Our current licensees include ALPS Alpine, Continental, Preh, Panasonic Automotive Systems, Mobase Electronics (formerly Seoyon Electronics) and Tokai Rika. Revenue generated from automotive customers, as a percentage of our total revenue, in 2021 and 2020, were 19% and 15%, respectively. Other: We offer patent licenses to other markets. Our current licensees include Stanley, Point Mobile, Lexmark, and others.
Ltd., Mobase Electronics (formerly Seoyon Electronics), Tokai Rika and Vishay Intertechnology. Revenue generated from automotive customers, as a percentage of our total revenue, in 2022 and 2021, represented 13% and 19%, respectively. Other: We offer patent licenses to other markets.
Revenue generated from customers in the gaming and VR market, as a percentage of our total revenue, in 2021 and 2020, were 21% and 15%, respectively. 9 Table of Contents Automotive: We offer patent licenses and assistance such as reference designs, prototypes and enablement services to automotive makers and suppliers.
Revenue generated from customers in the gaming and VR market, represented 21% of our total revenue, in each of the years ended December 31, 2022, and 2021. Automotive: We offer patent licenses and assistance such as reference designs, prototypes and enablement services to automotive makers and suppliers. Our current licensees include ALPS Alpine, Continental, Preh, Nissha Co.
Intellectual Property Protection of our IP portfolio is crucial to our business. We rely on a combination of patents, copyrights, trade secrets, trademarks, nondisclosure agreements with employees and third parties, licensing arrangements, and other contractual agreements with third parties to protect our IP.
We rely on a combination of patents, copyrights, trade secrets, trademarks, nondisclosure agreements with employees and third parties, licensing arrangements, and other contractual agreements with third parties to protect our IP. We maintain and support an active program to protect our IP, primarily through the filing of patent applications and the defense of issued patents against infringement.
As of December 31, 2021, we and our wholly owned subsidiaries had more than 1,600 currently issued or pending patents worldwide that cover various aspects of our technologies.
This could result in ongoing dispute resolution and litigation efforts, as we seek to protect the investment that we and our valid licensees have made in our technology. As of December 31, 2022, we and our wholly owned subsidiaries had more than 1,200 currently issued or pending patents worldwide that cover various aspects of our technologies.
We have multi-disciplinary expertise in usability and multimodal user interface design, actuator design, sensors, integration, real-time simulation algorithms, control, and software development. Our R&D team works with existing and 10 Table of Contents potential partners to help them assess and prove the value of haptics in their field of interest, creating competitive differentiators and value-added solutions.
Our R&D team works with existing and potential partners to help them assess and prove the value of haptics in their field of interest, creating competitive differentiators and value-added solutions. 9 Table of Contents Intellectual Property Protection of our IP portfolio is crucial to our business.
Monetize: License our technology to customers for use in the creation, distribution and playback of high-quality haptic experiences in various products, services and markets. 7 Table of Contents Expand Markets and Applications : Work closely with component suppliers, chip vendors, systems integrators, content enablers and other partners to broaden the use of haptics within our current core markets and to expand it into emerging markets, such as virtual and augmented reality.
Monetize: License our technology to customers for use in the creation, distribution and playback of high-quality haptic experiences in various products, services and markets.
Revenue generated from other customers, as a percentage of our total revenue, in 2021 and 2020 were not material. We expect the mix of our total revenue from our markets to remain fairly consistent.
We expect the mix of our total revenue from our markets to remain fairly consistent , but believe that certain emerging markets, such as the VR/AR market may have potential to affect our total revenue mix.
We maintain and support an active program to protect our IP, primarily through the filing of patent applications and the defense of issued patents against infringement. Parties who license our IP make an investment in our technology, and that investment gets devalued when unlicensed parties use our IP.
Parties who license our IP make an investment in our technology, and that investment gets devalued when unlicensed parties use our IP. Litigation against unlicensed third parties is a last step after all other avenues for resolution have been exhausted.
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As haptics gains wider acceptance in the market, the likelihood of unlicensed use of our IP increases. This could result in ongoing dispute resolution and litigation efforts, as we seek to protect the investment that we and our valid licensees have made in our technology.
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Our current licensees include Stanley, Nippon Seiki, Elan Microelectronics, Wacom Co., Ltd., and others. 8 Table of Contents Revenue generated from other customers in 2022 and 2021, were 6% and 2% of our total revenue, respectively.
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We have multi-disciplinary expertise in usability and multimodal user interface design, actuator design, sensors, integration, real-time simulation algorithms, control, and software development.
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Employees As of December 31, 2022, we had 20 employees, 19 of which were full-time equivalent employees and who are in 4 countries. Of these, 14, or approximately 74%, were located in the United States and Canada.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeClaims of IP infringement also might require us to enter into costly settlement or license agreements or pay costly damage awards. Even if we have an agreement that provides for a third party to indemnify us against such costs, the indemnifying party may be unable or unwilling to perform its contractual obligations.
Biggest changeEven if we have an agreement that provides for a third party to indemnify us against such costs, the indemnifying party may be unable or unwilling to fulfil its contractual obligations. 20 Table of Contents We may license some technologies from third parties and in doing so, we must rely upon the owners of these technologies for information on the origin and ownership of the technologies.
To remain competitive in the gaming market, we must continue introduce new haptic patents in a timely manner and the market must adopt such technology.
To remain competitive in the gaming market, we must continue to introduce new haptic patents in a timely manner and the market must adopt such technology.
Any repurchases by us pursuant to a stock repurchase program could affect our stock price and add volatility. There can be no assurance that any repurchases will be made under any program, nor is there any assurance that a sufficient number of shares of our common stock will be repurchased to satisfy the market’s expectations.
Any repurchases by us pursuant to our stock repurchase program could affect our stock price and add volatility. There can be no assurance that any repurchases will be made under any program, nor is there any assurance that a sufficient number of shares of our common stock will be repurchased to satisfy the market’s expectations.
Furthermore, there can be no assurance that any repurchases conducted under any plan will be made at the best possible price. The existence of a stock repurchase program could also cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock.
Furthermore, there can be no assurance that any repurchases conducted under any plan will be made at the best possible price. The existence of our stock repurchase program could also cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock.
Specific challenges that we face related to negotiations with prospective licensees include: • difficulties caused by the effects of COVID-19 on prospective licensees’ businesses; • 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; 13 Table of Contents • 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.
Specific challenges that we face related to negotiations with prospective licensees include: • difficulties caused by the effects of COVID-19 on prospective licensees’ businesses; • 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; 12 Table of Contents • 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.
Our success largely depends on our ability to integrate any new senior management within our organization in order to achieve our operating objectives, and changes in other key positions may affect our financial performance and results of operations as new members of management become familiar with our business. General employee turnover also presents risks discussed in this paragraph.
Our success largely depends on our ability to integrate any new senior management within our organization in order to achieve our operating objectives, and changes in other key positions may affect our financial performance and results of operations as new members of management become familiar with our business. General employee turnover also presents the risks discussed in this paragraph.
In the second quarter of 2020, we recorded this deposit as Long-term deposits on our Condensed Consolidated Balance Sheets . 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. The Korea Tax Tribunal hearing took place on March 5, 2019.
In the second quarter of 2020, we recorded this deposit as Long-term deposits on our Consolidated Balance Sheets . 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. The Korea Tax Tribunal hearing took place on March 5, 2019.
If the additional income tax expense was not related to the periods assessed by Korean tax authorities and for a which we recorded a Long-term deposit on our Consolidated Balance Sheets , then the additional income tax expense would be accrued as an Other current liabilities .
If the additional income tax expense was not related to the periods assessed by Korean tax authorities and for a which we recorded a Long-term deposit on our Consolidated Balance Sheets , then the additional income tax expense would be accrued as Other current liabilities .
In the first quarter of 2019, $6.9 million was recorded as a deposit included in Long-term deposits on our Condensed Consolidated Balance Sheets . For additional background on this matter, please see Part I, Item 3 Legal Proceedings.
In the first quarter of 2019, $6.9 million was recorded as a deposit included in Long-term deposits on our Consolidated Balance Sheets . For additional background on this matter, please see Part I, Item 3 Legal Proceedings.
Actual or perceived security breaches could result in unauthorized use of or access to our systems, system interruptions or shutdowns, unauthorized, accidental, or unlawful access to, or disclosure, modification, misuse, loss or destruction of, our or our customers’ data or intellectual property, may 22 Table of Contents lead to litigation, indemnity obligations, regulatory investigations and other proceedings, severe reputational damage adversely affecting customer or investor confidence and causing damage to our brand, indemnity obligations, disruption to our operations, damages for contract breach, and other liability, reduction in the value of our investment in research and development and other strategic initiatives, and adverse effects upon our revenues and operating results.
Actual or perceived security breaches could result in unauthorized use of or access to our systems, system interruptions or shutdowns, unauthorized, accidental, or unlawful access to, or disclosure, modification, misuse, loss or destruction of, our or our customers’ data or intellectual property, may lead to litigation, indemnity obligations, regulatory investigations and other proceedings, severe reputational damage adversely affecting customer or investor confidence and causing damage to our brand, indemnity obligations, disruption to our operations, damages for contract breach, and other liability, reduction in the value of our investment in research and development and other strategic initiatives, and adverse effects upon our revenues and operating results.
For example, on April 5, 2021, LGE announced that it would wind down and close its mobile business unit by July 31, 2021. Our failure to continuously develop or acquire successful innovations and obtain patents on those innovations could significantly harm our business, financial condition, results of operations or cash flows.
For example, on April 5, 2021, LGE announced that it would wind down and close its mobile business unit by July 31, 2021. Our failure to continuously develop or acquire successful innovations and obtain patents on those innovations could significantly harm our business, financial condition, results of operations or cash flow.
For example, on November 3, 2020, California voters passed Proposition 24, also known as the California Privacy Rights and Enforcement Act of 2020, a November 2020 ballot measure that, among other effects, expanded or amended the provisions of the CCPA, allowed consumers to direct businesses to not share their personal information, removed the time period in which businesses can fix violations before being penalized, and created the California Privacy Protection Agency to enforce the state’s consumer data privacy laws.
For example, on November 3, 2020, California voters passed Proposition 24, also known as the California Privacy Rights and Enforcement Act of 2020, a November 2020 ballot measure that, among other effects, expanded or amended the provisions of the CCPA, allowed consumers to direct businesses to not share their personal information, removed the time period in which businesses can fix 23 Table of Contents violations before being penalized, and created the California Privacy Protection Agency to enforce the state’s consumer data privacy laws.
For example, for the year ended December 31, 2021, Samsung accounted for a significant amount of our total revenues. In addition, we cannot be certain that other customers that have accounted for significant revenue in past periods, individually or as a group, will continue to generate similar revenue in any future period.
For example, for the year ended December 31, 2022, Samsung accounted for a significant amount of our total revenues. In addition, we cannot be certain that other customers that have accounted for significant revenue in past periods, individually or as a group, will continue to generate similar revenue in any future period.
Our management concluded that our internal control over financial reporting was effective as of December 31, 2021. However, we have in the past had material weaknesses in our internal control over financial reporting, and there are inherent limitations on the effectiveness of internal controls.
Our management concluded that our internal control over financial reporting was effective as of December 31, 2022. However, we have in the past had material weaknesses in our internal control over financial reporting, and there are inherent limitations on the effectiveness of internal controls.
If we determine to make these investments, they may not provide a return or lead to an increase in our operating results, and we may not obtain the benefits of these investments that we intend to recognize when making them.
If we decide to make these investments, they may not provide a return or lead to an increase in our operating results, and we may not obtain the benefits of these investments that we intend to recognize when making them.
In the event that it is determined that we are obligated to further indemnify Samsung and/or LGE for withholding taxes imposed by the Korean tax authorities, receive further requests for reimbursement of tax liabilities from other licensees, we could incur significant expenses. Our international operations subject us to additional risks and costs.
In the event that it is determined that we are obligated to further indemnify Samsung and/or LGE for withholding taxes imposed by the Korean tax authorities, receive further requests for reimbursement of tax liabilities from other licensees, we could incur significant expenses. 17 Table of Contents Our international operations subject us to additional risks and costs.
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met; no evaluation of controls can provide 25 Table of Contents absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our company will have been detected.
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met; no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our company will have been detected.
On July 6, 2021, we entered into an equity distribution agreement with Craig-Hallum, pursuant to which we are able to issue and sell shares of our common stock having an aggregate offering price of up to $60 million, from time to time, through an “at the market” equity offering program under which Craig-Hallum is acting as sales agent.
On July 6, 2021, we entered into an equity distribution agreement with Craig-Hallum, pursuant to which we can to issue and sell shares of our common stock having an aggregate offering price of up to $60 million, from time to time, through an “at the market” equity offering program under which Craig-Hallum is acting as sales agent.
Increasing case numbers and new variants of COVID-19, such as the Delta and Omicron variants, could cause governments around the world to implement or reinstitute such restrictions. The full extent to which the COVID-19 pandemic will impact our business and operating results will depend on future developments that are highly uncertain and cannot be accurately predicted.
Increasing case numbers and new variants of COVID-19, could cause governments around the world to implement or reinstitute such restrictions. The full extent to which the COVID-19 pandemic will impact our business and operating results will depend on future developments that are highly uncertain and cannot be accurately predicted.
In addition, foreign countries may impose tariffs, duties, price controls, or other restrictions on foreign currencies or trade barriers, any of which could make it more difficult for us to conduct our business internationally. Our international operations could also increase our exposure to complex international tax rules and regulations.
In addition, foreign countries may impose tariffs, duties, price controls, or other restrictions on foreign currencies or trade barriers, 18 Table of Contents any of which could make it more difficult for us to conduct our business internationally. Our international operations could also increase our exposure to complex international tax rules and regulations.
Additionally, the implementation of these initiatives impose additional costs on us. If our ESG initiatives fail to satisfy investors, customers, partners and our other stakeholders, our reputation, our ability to sell products and services to customers, our ability to attract or retain employees, and our attractiveness as an investment, business partner or acquiror could be negatively impacted.
Additionally, the implementation of these initiatives impose additional costs on us. If our ESG initiatives fail to satisfy investors, customers, partners and our other stakeholders, our reputation, our ability to license technology and sell services to customers, our ability to attract or retain employees, and our attractiveness as an investment, business partner or acquiror could be negatively impacted.
Pursuant to our license compliance program, we audit certain licensees to review the accuracy of the information contained in their royalty reports in an effort to decrease the risk of our not receiving royalty revenues to which we are entitled, but we cannot give assurances that such audits will be effective.
Pursuant to our license compliance program, we audit certain licensees to review the accuracy of the information contained in their royalty 14 Table of Contents reports in an effort to decrease the risk of our not receiving royalty revenues to which we are entitled, but we cannot give assurances that such audits will be effective.
If this financing is obtained through the issuance of equity securities, debt convertible into equity securities, options or warrants to acquire equity securities or similar instruments or securities, our existing stockholders will experience dilution in their ownership percentage upon the issuance, conversion or exercise of such securities and such dilution could be significant.
If this financing is obtained through the issuance of equity securities, debt convertible into equity securities, options or warrants to acquire equity securities 25 Table of Contents or similar instruments or securities, our existing stockholders will experience dilution in their ownership percentage upon the issuance, conversion or exercise of such securities and such dilution could be significant.
Among other ongoing expenses, we may continue to incur expenses related to: • sales and marketing efforts; • research and development activities; 17 Table of Contents • the protection and enforcement of our IP; and • litigation. If our revenues grow more slowly than we anticipate or if our operating expenses exceed our expectations, we may not maintain profitability.
Among other ongoing expenses, we may continue to incur expenses related to: • sales and marketing efforts; • research and development activities; • the protection and enforcement of our IP; and • litigation. If our revenues grow more slowly than we anticipate or if our operating expenses exceed our expectations, we may not maintain profitability.
Any failure to provide high quality and reliable technologies, whether caused by our own failure or failures of our suppliers or customers, could damage our reputation and reduce demand for our technologies. Our technologies have in the past contained, and may in the future contain, undetected errors or defects.
Any failure to provide high quality and reliable technologies, whether caused by our own failure or failures of our suppliers or customers, could damage our reputation and reduce demand for our technologies. Our technologies have in the past 22 Table of Contents contained, and may in the future contain, undetected errors or defects.
Such open source licenses may mandate that software developed based on source code that is subject to the open source license, or combined in specific ways with such open source software, become subject to the open source license.
Such open source licenses may mandate that software developed based on source code that is subject to the open source license, or combined in specific ways with such open source software, becomes subject to the open source license.
Such change in GAAP or their interpretation have historically and could in the future have a significant effect on our reported financial condition and/or results of operations.
Such changes in GAAP or their interpretation have historically and could in the future have a significant effect on our reported financial condition and/or results of operations.
As a result of this reorganization, we have maintained our overall effective tax rate through changes in how we develop and use our intellectual property and changes in the structure of our international sales operations, including by entering into intercompany arrangements.
As a result of this 16 Table of Contents reorganization, we have maintained our overall effective tax rate through changes in how we develop and use our intellectual property and changes in the structure of our international sales operations, including by entering into intercompany arrangements.
In the past twenty-four months, our stock price has fluctuated from as low as $4.23 per share in March 2020 to a high of $16.64 in February 2021. This significant volatility may continue to occur in the future for reasons that are unrelated to our business or if our business experiences unexpected results.
In the past thirty-six months, our stock price has fluctuated from as low as $4.23 per share in March 2020 to a high of $16.64 in February 2021. This significant volatility may continue to occur in the future for reasons that are unrelated to our business or if our business experiences unexpected results.
As a result, our revenues may not grow and could decline. 23 Table of Contents 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.
As a result, our revenues may not grow and could decline. 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.
Changes in GAAP and reporting standards could substantially change our reporting practices in a number of areas, including revenue recognition and recording of assets and liabilities, and could consequently affect our reported financial condition or results of operations.
Changes in GAAP and reporting standards could substantially change our reporting practices in a number of 27 Table of Contents areas, including revenue recognition and recording of assets and liabilities, and could consequently affect our reported financial condition or results of operations.
For example, the price of these digital or alternative currencies may be influenced by regulatory, commercial and technical factors that are highly uncertain and unrelated to our business.
For example, the price of these digital or alternative currencies may 26 Table of Contents be influenced by regulatory, commercial and technical factors that are highly uncertain and unrelated to our business.
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 Consolidated 18 Table of Contents Statements of Income and Comprehensive Income in the period of the new determination.
If 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 Consolidated Statements of Income and Comprehensive Income in the period of the new determination.
In addition, these provisions could delay or frustrate the removal of incumbent directors and could make more difficult a merger, tender offer or proxy contest involving us, or impede an attempt to acquire a significant or controlling interest in us, even if such events might be beneficial to us and our stockholders. 30 Table of Contents Item 1B.
In addition, these provisions could delay or frustrate the removal of incumbent directors and could make more difficult a merger, tender offer or proxy contest involving us, or impede an attempt to acquire a significant or controlling interest in us, even if such events might be beneficial to us and our stockholders.
We currently have sales personnel and other personnel in Canada, the United Kingdom and Japan who may engage in various activities, including engaging our customers and prospective customers outside of the United States. International revenues accounted for approximately 88% of our total revenues in 2021.
We currently have sales personnel and other personnel in Canada, the United Kingdom and Japan who may engage in various activities, including engaging our customers and prospective customers outside of the United States. International revenues accounted for approximately 72% of our total revenues in 2022.
Due to the length of time required to negotiate a license arrangement, there may be delays in the receipt of the associated revenue, which could negatively impact our revenue and cash flow. 12 Table of Contents Specific challenges that we face related to negotiations with existing licensees include: • difficulties caused by the effects of COVID-19 on our existing licensees’ businesses; • 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; • 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; 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.
Specific challenges that we face related to negotiations with existing licensees include: • difficulties caused by the effects of COVID-19 on our existing licensees’ businesses; 11 Table of Contents • 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; • 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; 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.
Although we have a significant software and patent position with respect to virtual reality (or VR) 20 Table of Contents peripherals and systems, the market may not become large enough to generate material revenues.
Although we have a significant software and patent position with respect to virtual reality (or VR) peripherals and systems, the market may not become large enough to generate material revenues.
There is no assurance that we will be able to fully utilize the NOL and we may be required to record an additional valuation allowance related to the amount of the NOL that may not be realized, which could impact our result of operations. As noted, we believe that these NOL carryforwards are a valuable asset for us.
There is no assurance that we will be able to fully utilize the NOL and we may be required to record an additional valuation allowance related to the amount of the NOL that may not be realized, which could impact the results of operations. 28 Table of Contents As noted, we believe that these NOL carryforwards are a valuable asset for us.
As part of our growth plan, we intend to participate in standards-setting organizations. The rejection of our haptic technology or failure of the standards-setting organizations to develop timely commercially viable standards may negatively impact our business and financial results. Our business may suffer if third parties assert that we violate their IP rights.
The rejection of our haptic technology or failure of the standards-setting organizations to develop timely commercially viable standards may negatively impact our business and financial results. Our business may suffer if third parties assert that we violate their IP rights.
We had an accumulated deficit of $100.7 million as of December 31, 2021, and we may not maintain consistent profitability in the future. As of December 31, 2021, we had an accumulated deficit of $100.7 million. We need to generate significant ongoing revenues to maintain consistent profitability.
We had an accumulated deficit of $70.0 million as of December 31, 2022, and we may not maintain consistent profitability in the future. As of December 31, 2022, we had an accumulated deficit of $70.0 million. We need to generate significant ongoing revenues to maintain consistent profitability.
Because we have historically depended on the availability of certain forms of legal process to (i) enforce our patents and (ii) obtain fair and adequate compensation for our investments in research and development and for the unauthorized use of our intellectual property, developments in law and/or policy that undermine our ability to do so could have a negative impact on future licensing efforts and on revenue derived from such efforts. 16 Table of Contents Rulings of courts and administrative bodies may affect our strategies for patent prosecution, licensing and enforcement.
Because we have historically depended on the availability of certain forms of legal process to (i) enforce our patents and (ii) obtain fair and adequate compensation for our investments in research and development and for the unauthorized use of our intellectual property, developments in law and/or policy that undermine our ability to do so could have a negative impact on future licensing efforts and on revenue derived from such efforts.
A key part of our business strategy is to license our software and patents (and other IP) to companies that manufacture and sell products incorporating our touch-enabling technologies. For the year ended December 31, 2021, 99% of our total revenues were royalty and license revenues, as compared to 99% for the year ended December 31, 2020.
A key part of our business strategy is to license our software and patents (and other IP) to companies that manufacture and sell products incorporating our touch-enabling technologies. In each of the years ended December 31, 2022 and 2021, 99% of our total revenues were royalty and license revenues.
Lack of management continuity could harm our customer relationships, delay product development processes, adversely affect our ability to successfully execute our growth strategy, result in operational and administrative inefficiencies and added costs, and could impede our ability to recruit new talented individuals to senior management positions, which could adversely impact our results of operations, stock price and customer relationships.
Lack of management continuity could harm our customer relationships, adversely affect our ability to successfully execute our growth strategy, result in operational and administrative inefficiencies and added costs, and could impede our ability to recruit new talented individuals to senior management positions. All or any of these could adversely impact the results of operations and stock price.
In Montreal, Canada, and the greater San Francisco Bay Area, candidates and employees view the stock component of compensation as an important factor in deciding both whether to accept an employment opportunity as well as whether to remain in a position at a company.
In Montreal, Canada, and other geographical regions, candidates and employees view the stock component of compensation as an important factor in deciding both whether to accept an employment opportunity as well as whether to remain in a position at a company.
These factors include: • the impact of COVID-19; • 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; 26 Table of Contents • the timing of introductions and market acceptance of new technologies and products and product enhancements by us, our licensees, our competitors, or their competitors; • the timing of work performed under development agreements; and • errors in our licensees’ royalty reports, and corrections and true-ups to royalty payments and royalty rates from prior periods.
These factors include: • the impact of COVID-19; • 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.
In some cases, we have and may become party to legal proceedings in which we are adverse to companies that have significantly greater financial resources than us. For example, we had previously initiated patent infringement litigation against Samsung and Motorola.
In some cases, we have and may become party to legal proceedings in which we are adverse to companies that have significantly greater financial resources than us. For example, we had initiated patent infringement litigation against Meta Platforms, Inc., f/k/a Facebook, Inc.
There can be no assurance that these transactions, if pursued or made, will be beneficial to our business or financial condition. Any stock repurchase program could affect our stock price and add volatility. We have established stock repurchase programs in the past, and may adopt similar programs in the future.
There can be no assurance that these transactions, if pursued or made, will be beneficial to our business or financial condition. Any stock repurchase program could affect our stock price and add volatility.
We may not earn royalty revenue on our automotive device technologies unless and until products featuring our technologies are shipped to customers, which may not occur until several years after we enter into an agreement with a manufacturer or a supplier to a manufacturer.
The product development process for automobiles is very lengthy, sometimes longer than four years. We may not earn royalty revenue on our automotive device technologies unless and until products featuring our technologies are shipped to customers, which may not occur until several years after we enter into an agreement with a manufacturer or a supplier to a manufacturer.
This CJEU decision or other legal challenges relating to cross-border data transfer may serve as a basis for our personal data handling practices to be challenged and may otherwise adversely impact our business, financial condition and operating results.
At present, there are few if any viable alternatives to the Privacy Shield and the SCCs. This CJEU decision or other legal challenges relating to cross-border data transfer may serve as a basis for our personal data handling practices to be challenged and may otherwise adversely impact our business, financial condition and operating results.
Smith resigned as Interim Chief Executive Officer and Francis Jose, who had replaced Mike Okada as General Counsel in May 2021, was appointed the Chief Executive Officer. In addition, in December 2021, William Martin was appointed as Chief Strategy Officer.
For example, in August 2021, Jared Smith resigned as Interim Chief Executive Officer and Francis Jose, who had replaced Mike Okada as General Counsel in May 2021, was appointed the Chief Executive Officer.
For example, in recent years, the USITC and U.S. courts, including the U.S. Supreme Court and the U.S. Court of Appeals for the Federal Circuit, have taken actions that have been viewed as unfavorable to patentees.
Rulings of courts and administrative bodies may affect our strategies for patent prosecution, licensing and enforcement. For example, in recent years, the USITC and U.S. courts, including the U.S. Supreme Court and the U.S. Court of Appeals for the Federal Circuit have taken actions that have been viewed as unfavorable to patentees.
Item 1A. Risk Factors As previously discussed, our actual results could differ materially from our forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to: These and many other factors described in this report could adversely affect our operations, performance and financial condition .
Item 1A. Risk Factors As previously discussed, our actual results could differ materially from our forward-looking statements. These and many other factors described in this report could adversely affect our operations, performance and financial condition.
This is due to changing consumer habits fueled by the COVID-19 pandemic. If our customers experience significant shortages of electronic components that result in a reduction in our revenues, then our business, results of operations, financial condition, cash flows, and stock price may be adversely affected.
If our customers experience significant shortages of electronic components that result in a reduction in our revenues, then our business, results of operations, financial condition, cash flows, and stock price may be adversely affected.
We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”) and other anticorruption, anti-bribery and anti-money laundering laws in the jurisdictions in which we do business, both domestic and abroad.
Our failure to comply with complex U.S. and foreign laws and regulations could have a material adverse effect on our operations. We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”) and other anticorruption, anti-bribery and anti-money laundering laws in the jurisdictions in which we do business, both domestic and abroad.
If we are not able to attract, recruit and retain qualified personnel, we may not be able to effectively develop and deploy our technologies. Our technologies are complex, and we rely upon our employees to identify new sales and business development opportunities, support and maintain positive relationships with our licensees, enhance existing technologies, and develop new technologies.
Our technologies are complex, and we rely upon our employees to identify new sales and business development opportunities, support and maintain positive relationships with our licensees, enhance existing technologies, and develop new technologies.
The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results, and reputation.
The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results, and reputation. 21 Table of Contents If we are unable to develop open source compliant products, our ability to license our technologies and generate revenues may be impaired.
In addition, as laws, regulations and standards continue to change, often with varying degrees of specificity and clarity, we could face uncertainty regarding best practices and compliance with such evolving regimes, which could result in higher costs from increased attention paid to disclosure and governance practices and controls. 29 Table of Contents 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.
In addition, as laws, regulations and standards continue to change, often with varying degrees of specificity and clarity, we could face uncertainty regarding best practices and compliance with such evolving regimes, which could result in higher costs from increased attention paid to disclosure and governance practices and controls.
The process for determining whether impairment is other-than-temporary usually requires difficult, subjective judgments about the future financial performance of the issuer.
Any of the foregoing factors could cause other-than-temporary impairment in future periods and result in realized losses. The process for determining whether impairment is other-than-temporary usually requires difficult, subjective judgments about the future financial performance of the issuer.
For instance, the semiconductor industry has recently faced significant global supply chain issues as a result of the impact of the COVID-19 pandemic and the related imposition of government restrictions on staffing and facility operations, supply chain shortages, and other disruptions. Even though government restrictions have loosened, integrated circuit manufacturers continued to struggle to meet the new surge in demand.
For instance, the semiconductor industry has recently faced significant global supply chain issues as a result of the impact of the COVID-19 pandemic and the related imposition of government restrictions on staffing and facility operations, supply 13 Table of Contents chain shortages, and other disruptions.
If we cannot or do not license the infringed IP at all or on reasonable terms, or substitute similar technology from another source, our business, financial position, results of operations or cash flows could suffer. Our business and operations could suffer in the event of any actual or perceived security breaches.
However, representations may not be accurate, and indemnification may not provide adequate compensation for breach of the representations. If we cannot or do not license the infringed IP at all or on reasonable terms, or substitute similar technology from another source, our business, financial position, results of operations or cash flows could suffer.
We continue to monitor and evaluate our strategies for prosecution, licensing and enforcement with regard to these developments in law and policy; however, any resulting change in such strategies could have a material adverse effect on our business and financial condition.
We continue to monitor and evaluate our strategies for prosecution, licensing and enforcement with regard to these developments in law and policy; however, any resulting change in such strategies could have a material adverse effect on our business and financial condition. 15 Table of Contents If we are not able to attract, recruit and retain qualified personnel, we may not be able to effectively develop and deploy our technologies.
However, on July 16, 2020, the Court of Justice of the European Union (“CJEU”) invalidated Decision 2016/1250 on the adequacy of the protection provided by the EU-U.S. Privacy Shield Framework. This decision may increase our costs and limit our ability to process personal data from the European Union.
Previously, we relied on the EU-U.S. Privacy Shield framework to legitimize transfers of personal data from the EEA to the United States. However, on July 16, 2020, the Court of Justice of the European Union (“CJEU”) invalidated Decision 2016/1250 on the adequacy of the protection provided by the EU-U.S. Privacy Shield Framework.
The same decision also cast doubt on the ability to use one of the primary alternatives to the Privacy Shield, namely, SCCs, to lawfully transfer personal data from Europe to the United States and most other countries. At present, there are few if any viable alternatives to the Privacy Shield and the SCCs.
This decision may increase our costs and limit our ability to process personal data from the European Union. The same decision also cast doubt on the ability to use one of the primary alternatives to the Privacy Shield, namely, SCCs, to lawfully transfer personal data from Europe to the United States and most other countries.
We currently intend to use the net proceeds from our “at the market” offering announced in July 2021 for working capital and other general corporate purposes. We may also use a portion of the net proceeds from the offering to acquire or invest in businesses, assets or technologies. Accordingly, we will retain broad discretion over the use of proceeds.
We will have broad discretion as to the use of proceeds from the “at the market” offering that we announced in July 2021, and we may not use the proceeds effectively. We currently intend to use the net proceeds from our “at the market” offering announced in July 2021 for working capital and other general corporate purposes.
If our licensees’ products fail to achieve commercial success, or if their products are recalled because of quality control problems or if they do not timely ship products incorporating our touch-enabling technologies or fail to achieve strong sales, our revenues could decline. 21 Table of Contents 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.
If our licensees’ products fail to achieve commercial success, or if their products are recalled because of quality control problems or if they do not timely ship products incorporating our touch-enabling technologies or fail to achieve strong sales, our revenues could decline.
In this competitive recruiting environment, especially when hiring in Montreal, Canada, and the greater San Francisco Bay Area, our compensation packages need to be attractive to the candidates we recruit.
In this competitive recruiting environment, especially when hiring in Montreal, Canada, and other geographical regions that have higher costs of living, our compensation packages need to be attractive to the candidates we recruit.
The GDPR requires, among other things, that personal data only be transferred outside of the European Economic Area (“EEA”) to certain jurisdictions, including the United States, if steps are taken to legitimize those data transfers.
The GDPR requires, among other things, that personal data only be transferred outside of the European Economic Area (“EEA”) to certain jurisdictions, including the United States, if steps are taken to legitimize those data transfers. We rely on the Swiss-U.S. Privacy Shield programs, and the use of Standard Contractual Clauses (“SCCs”) approved by the EU Commission, to legitimize these transfers.
If our development efforts are not successful or are significantly delayed, companies may not incorporate our haptic innovations into their products and our revenues may not grow and could decline. 14 Table of Contents Shortages of electronic components (such as integrated circuits) that may be integral to the manufacturing of our customers’ products may cause a decrease in production and sales of our customers’ products which could result in lower royalties payable to us.
Shortages of electronic components (such as integrated circuits) that may be integral to the manufacturing of our customers’ products may cause a decrease in production and sales of our customers’ products which could result in lower royalties payable to us.
Further, our revenues in the automotive market depend in large part on the number of haptic touch interfaces that are incorporated into vehicles. The COVID-19 pandemic, and its resulting economic and other impacts, have caused and may in the future cause significant adverse effects on our customers’ ability to manufacture, distribute and sell products incorporating our touch-enabling technologies.
The COVID-19 pandemic, its resulting economic and other impacts, and component shortages, such as semiconductor shortages, have caused and may in the future cause significant adverse effects on our customers’ ability to manufacture, distribute and sell products incorporating our touch-enabling technologies.
If we are unable to sell any digital or alternative currencies that we hold, or if we are forced to sell any of these currencies that we may hold at a significant loss, in order to meet our working capital requirements, our business and financial condition could be negatively impacted. 28 Table of Contents We may engage in the acquisition of other companies, investments, joint ventures and strategic alliances outside of our current line of business, which may have an adverse material effect on our existing business.
If we are unable to sell any digital or alternative currencies that we hold, or if we are forced to sell any of these currencies that we may hold at a significant loss, in order to meet our working capital requirements, our business and financial condition could be negatively impacted.
If we are unable to develop open source compliant products, our ability to license our technologies and generate revenues may be impaired. We have seen, and believe that we will continue to see, an increase in customers requesting that we develop products that will operate in an “open source” environment.
We have seen, and believe that we will continue to see, an increase in customers requesting that we develop products that will operate in an “open source” environment.
Any new or enhanced haptic innovations may not be favorably received by our licensees, potential licensees, or consumers and we may not be able to monetize such haptic innovations.
Any new or enhanced haptic innovations may not be favorably received by our licensees, potential licensees, or consumers and we may not be able to monetize such haptic innovations. If our development efforts are not successful or are significantly delayed, companies may not incorporate our haptic innovations into their products and our revenues may not grow and could decline.
We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees and customers.
We may take further actions as may be required by government authorities or if we determine are in the best interests of our employees and customers. These practices may have an adverse effect on our employees’ productivity and morale and our ability to engage and support our current and prospective customers.
Pending application of the net proceeds as described above, we may, from time to time, invest in digital or alternative currencies such as bitcoin or other cryptocurrencies. We may also invest net proceeds in short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.
We may also invest net proceeds in short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government. We could recognize losses with respect to the marketable securities in which we invest.
Similarly, our failure or perceived failure to pursue or fulfill our goals, targets and objectives or to satisfy various reporting standards within the timelines we announce, or at all, could also have similar negative impacts and expose us to government enforcement actions and private litigation.
Similarly, our failure or perceived failure to pursue or fulfill our goals, targets and objectives or to satisfy various reporting standards within the timelines we announce, or at all, could also have similar negative impacts and expose us to government enforcement actions and private litigation. 24 Table of Contents General Risk Factors: Investment Risks Our quarterly revenues and operating results are volatile, and if our future results are below the expectations of public market analysts or investors, the price of our common stock is likely to decline.
It may be more difficult for us to protect our IP in foreign countries, and as a result foreign counterparties may be more likely to steal our know-how, reverse engineer our software, or infringe our patents. 19 Table of Contents Our failure to comply with complex U.S. and foreign laws and regulations could have a material adverse effect on our operations.
Our technology licenses with customers in foreign countries subject us to an increased risk of theft of our technology. It may be more difficult for us to protect our IP in foreign countries, and as a result foreign counterparties may be more likely to steal our know-how, reverse engineer our software, or infringe our patents.
In the event that Microsoft increases its share of these markets relative to companies from whom we are not precluded from collecting royalty payments, our royalty revenue from other licensees in these market segments may decline.
In the event that Microsoft increases its share of these markets relative to companies from whom we are not precluded from collecting royalty payments, our royalty revenue from other licensees in these market segments may decline. 19 Table of Contents Automobiles incorporating our touch-enabling technologies are subject to lengthy product development periods, making it difficult to predict when and whether we will receive royalties for these product types.
Computer malware, ransomware, cyberattacks and other threats and methods used to gain unauthorized access to our information technology networks and systems have become more prevalent and sophisticated.
In addition, we collect, use and maintain our own confidential and proprietary business information, including information that may be personal information, and maintain intellectual property internally on our systems. Computer malware, ransomware, cyberattacks and other threats and methods used to gain unauthorized access to our information technology networks and systems have become more prevalent and sophisticated.
For example, on August 3, 2021, we filed an arbitration demand with the American Arbitration Association against Marquardt GmbH ("Marquardt"), one of our licensees in the automotive market.
For example, on August 3, 2021, we filed an arbitration demand with the American Arbitration Association against Marquardt GmbH ("Marquardt"), one of our licensees in the automotive market. While this matter is resolved, we may become involved in similar disputes in the future. For additional background on our litigation, please see Part I Item 3 Legal Proceedings.
We license some technologies from third parties and in doing so, we must rely upon the owners of these technologies for information on the origin and ownership of the technologies. As a result, our exposure to infringement claims may increase if the owners misrepresent, intentionally or unintentionally, the scope or validity of their ownership.
As a result, our exposure to infringement claims may increase if the owners misrepresent, intentionally or unintentionally, the scope or validity of their ownership. We generally obtain representations as to the origin and ownership of acquired or licensed technologies and indemnification to cover any breach of these representations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties We lease a facility in Montreal, Quebec, Canada of approximately 10,000 square feet, for our subsidiary, Immersion Canada Corporation. During 2019, we transitioned the majority of our research functions to our existing office in Montreal, Quebec. In 2020, we transitioned our Accounting, Human Resources Finance and IT functions from San Jose, California to Montreal, Canada.
Biggest changeItem 2. Properties We lease a facility in Montreal, Canada (the "Montreal Lease") of approximately 10,000 square feet, for our subsidiary, Immersion Canada Corporation. On June 6, 2022, we entered into a sublease agreement with Innovobot Fund LLP for the Montreal Facility.
On January 26, 2022, we entered into a lease agreement (the “Aventura Lease”) with COFE CIX Aventura, LLC, pursuant to which we lease approximately 1,390 square feet located at Aventura View Office Building, Suite 610, 2999 N.E. 191 st Street, Aventura, Florida.
This sublease commenced in June 2020 and ends on April 30, 2023 which is the lease termination date of the San Jose Facility. 29 Table of Contents On January 26, 2022, we entered into a lease agreement with COFE CIX Aventura, LLC, (the "Aventura Lease") pursuant to which we lease approximately 1,390 square feet located at Aventura View Office Building, Suite 610, 2999 N.E. 191 st Street, Aventura, Florida.
The lease for this property expires in February 2024. We lease a facility in San Jose, California of approximately 42,000 square feet, which we vacated in the first quarter of 2020. On March 12, 2020, we entered into a sublease agreement with Neato Robotics, Inc. (“Neato”) for the San Jose facility.
On March 12, 2020, we entered into a sublease agreement with Neato Robotics, Inc. (“Neato”) for the San Jose facility.
This sublease commenced in June 2020 and ends on April 30, 2023 which is the lease termination date of the original lease. On January 31, 2020, we entered into an agreement to lease approximately 5,000 square feet of office space in San Francisco, California. This lease expires in February 2022.
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. We also lease a facility in San Jose, California (the “San Jose Facility”) of approximately 42,000 square feet, which we vacated in the first quarter of 2020.
Financial Statements and Supplementary Data of this annual report on Form 10-K for more information on our lease obligations.
Financial Statements and Supplementary Data of this annual report on Form 10-K for more information on our lease obligations. Item 1. Legal Proceedings Immersion Corporation vs. Meta Platforms, Inc., f/k/a Facebook, Inc. On May 26, 2022, we filed a complaint against Meta in the United States District Court for the Western District of Texas.
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As a result of COVID-19, our San Francisco office has been closed since the first quarter of 2020 and we expect our San Francisco-based employees to continue to work-from-home in the foreseeable future.
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The complaint alleges that Meta’s 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 protect Meta from further infringement and to recover a reasonable royalty for such infringement. The complaint against Meta asserts infringement of the following patents: • U.S.
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Patent No. 8,469,806: “System and method for providing complex haptic stimulation during input of control gestures, and relating to control of virtual equipment” • U.S. Patent No. 8,896,524: “Context-dependent haptic confirmation system” • U.S. Patent No. 9,727,217: “Haptically enhanced interactivity with interactive content” • U.S. Patent No. 10,248,298: “Haptically enhanced interactivity with interactive content” • U.S.
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Patent No. 10,269,222: “System with wearable device and haptic output device” • U.S. Patent No. 10,664,143: “Haptically enhanced interactivity with interactive content” Meta responded to our complaint on August 1, 2022.
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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, and a hearing on the transfer motion occurred on January 23, 2023.
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In the meantime, claim construction briefing is closed, and fact discovery opened on February 7, 2023. The claim construction hearing is scheduled for March 6, 2023. Samsung Electronics Co. v.
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Immersion Corporation and Immersion Software Ireland Limited On April 28, 2017, we received a letter from 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.
Added
On July 12, 2017, on behalf of Samsung, we filed an appeal with the Korea Tax Tribunal regarding their findings with respect to the withholding taxes and penalties.
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On October 18, 2018, the Korea Tax Tribunal held a hearing and on November 19, 2018, the Korea Tax Tribunal issued its ruling in which it decided not to accept Immersion’s arguments with respect to the Korean tax authorities’ assessment of withholding tax and penalties imposed on Samsung.
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On behalf of Samsung, we filed an appeal with the Korea Administrative Court on February 15, 2019.
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On July 16, 2020, the Korea Administrative Court issued its ruling in which it ruled that the withholding taxes and penalties which were imposed by the Korean tax authorities on Samsung should be cancelled with some litigation costs to be borne by the Korean tax authorities.
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On March 27, 2019, we received the final award relating to the arbitration demand that Samsung had filed on September 29, 2017.
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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, 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. 30 Table of Contents On July 16, 2020, the Korea Administrative Court issued its ruling in which it ruled that the withholding taxes and penalties which were imposed by the Korean tax authorities on Samsung should be cancelled with some litigation costs to be borne by the Korean tax authorities.
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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.
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Samsung requested 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 August 1, 2020, the Korean tax authorities filed an appeal with the Korea High Court. The first hearing in the Korea High Court occurred on November 11, 2020.
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A second hearing occurred on January 13, 2021. A third hearing occurred on March 21, 2021. The Korea High Court had indicated that a final decision was originally expected on May 28, 2021, but instead, decided to hold a fourth hearing on July 9, 2021.
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On October 1, 2021, the Korea High Court issued its ruling in which it ruled that withholding taxes and penalties totaling approximately KRW 6,186,218,586 (approximately $5.2 million) in national-level withholding tax and local withholding taxes imposed by the Korean tax authorities on Samsung for royalties paid to Immersion during the period of 2012 – 2014 be cancelled on the basis that the Korea tax authorities wrongfully engaged in a duplicative audit with respect to such time period.
Added
The Korea High Court also ruled that approximately KRW 1,655,105,584 (approximately $1.4 million) of Korean National level withholding tax and local withholding tax imposed by the Korean tax authorities on Samsung for royalties paid to Immersion during 2015 and 2016 be upheld in part on the basis that Immersion Software Ireland Limited did not have sufficient economic substance to be considered the beneficial owner of the royalties paid by Samsung to Immersion Software Ireland Limited.
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On or about October 22, 2021, the Korean tax authorities filed an appeal with the Korea Supreme Court with respect to certain portions of the Korea High Court decision and we filed an appeal with the Korea Supreme Court with respect to certain portions of the Korea High Court decision.
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On December 1, 2021, the Korean tax authorities submitted its brief to the Korea Supreme Court challenging the cancellation by the Korea High Court of a portion of the withholding tax imposed by the Korean tax authorities.
Added
On December 3, 2021, we submitted our own brief to the Korea Supreme Court providing arguments in support of our position that Immersion Software Ireland Limited has sufficient economic substance to be considered the beneficial owner of the royalties paid by Samsung to Immersion Software Ireland Limited.
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Such brief also provided arguments challenging the calculation of the imposed withholding tax upheld by the Korea High Court. On December 20, the Korean tax authorities filed a rebuttal brief relating to our brief filed on December 3, 2021. On December 29, 2021, we filed our rebuttal brief relating to the Korean tax authorities’ brief filed on December 1, 2021.
Added
On February 24, 2022, the Korea Supreme Court issued a decision affirming the rulings of the Korea High Court. 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 $5.0 million) representing Korea national-level taxes, penalties and interest that was canceled by the Korea Supreme Court.
Added
We were also reimbursed an additional KRW 608,885,000 (approximately $0.5 million) representing local-level taxes, penalties and interest that was canceled by the Korea Supreme Court. LGE Korean Withholding Tax Matter On October 16, 2017, we received a letter from LG Electronics Inc.
Added
(“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.
Added
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.
Added
In the second quarter of 2020, we recorded this deposit as Long-term deposits on our Consolidated Balance Sheets . 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. The Korea Tax Tribunal hearing took place on March 5, 2019.
Added
On March 19, 2019, the Korea Tax Tribunal issued its ruling in which it decided not to accept our arguments with respect to the Korean tax authorities’ assessment of withholding tax and penalties imposed on LGE. On behalf of LGE, we filed an appeal with the Korea Administrative Court on June 10, 2019.
Added
The first hearing occurred on October 15, 2019. A second hearing occurred on December 19, 2019. A third hearing occurred on February 13, 2020. A fourth hearing occurred on June 9, 2020. A fifth hearing occurred on July 16, 2020.
Added
We anticipated a decision to be rendered on or about October 8, 2020, but the Korea Administrative Court scheduled and held a sixth hearing for November 12, 2020. A seventh hearing occurred on January 14, 2021. An eighth hearing occurred on April 8, 2021. A ninth hearing occurred on June 24, 2021.
Added
A tenth hearing occurred on 31 Table of Contents September 13, 2021. An eleventh hearing occurred on November 15, 2021 . A twelfth hearing occurred on December 23, 2021. The Court had indicated that it expected to render a decision on this matter by the end of February 2022.
Added
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 occurred on October 27, 2022. A fourteenth hearing occurred November 24, 2022.
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The Court had indicated that it expected to render a decision on this matter by December 31, 2022, but had subsequently updated the parties to indicate that a decision on this matter is expected by February 16, 2023. On February 15, 2023, we were informed that the Court had scheduled another hearing for April 27, 2023.
Added
Based on the developments in these cases, we regularly reassess the likelihood that we will prevail in some or all the claims from the Korean tax authorities.
Added
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 Consolidated Statements of Income and Comprehensive Income .
Added
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 Consolidated Statements of Income and Comprehensive Income in the period of the new determination.
Added
If the additional income tax expense was related to the periods assessed by Korean tax authorities and for which we recorded in Long-term deposits on our Consolidated Balance Sheets , then the additional income tax expense would be recorded as an impairment in the Long-term deposits .
Added
If the additional income tax expense was not related to the periods assessed by Korean tax authorities and for a which we recorded a Long-term deposits on our Consolidated Balance Sheets , then the additional income tax expense would be accrued as an Other current liabilities .
Added
We cannot predict the ultimate outcome of the above-mentioned actions that are pending, and we are unable to estimate any potential liability we may incur. Please also refer to our disclosures in Note 5. Contingencies of the Note to the Consolidated Financial Statements. Immersion Software Ireland Limited v.
Added
Marquardt GMBH 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.
Added
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.
Added
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.
Added
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.
Added
On September 30, 2021, we filed an answer to Marquardt’s counterclaim in which we denied the allegations set forth in Marquardt’s counterclaim. A preliminary hearing occurred on December 6, 2021, during which the parties agreed to explore mediation and the arbitrator set forth a schedule relating to the arbitration. A mediation session occurred during the period of March 14-16, 2022.
Added
At the mediation, we entered into a binding settlement term sheet with Marquardt pursuant to which we agreed to cause our arbitration demand to be dismissed. In exchange, Marquardt agreed to the prepayment of certain royalties otherwise payable under the Marquardt License.
Added
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. Item 4.
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Mine Safety Disclosures Not applicable. 32 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+16 added−1 removed0 unchanged
Biggest changeWe do not anticipate paying cash dividends in the foreseeable future. Unregistered Sales of Securities During the period covered by this Annual Report on Form 10-K, we have not sold any equity securities that were not registered under the Securities Act of 1933, as amended.
Biggest changeUnregistered Sales of Securities During the period covered by this Annual Report on Form 10-K, we have not sold any equity securities that were not registered under the Securities Act of 1933, as amended. Stock Repurchase Agreement On February 14, 2022, we entered into a Common Stock Repurchase Agreement (the “Agreement”) with Invenomic Capital Management LP. (“Invenomic”).
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information, Holders of Record and Dividends Our common stock is traded on the Nasdaq Global Market under the symbol “IMMR”. As of February 18, 2022, there were 65 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information, Holders of Record and Dividends Our common stock is traded on the Nasdaq Global Market under the symbol “IMMR”. As of February 10, 2023, there were 61 holders of record of our common stock.
The stock repurchase authorization has no expiration date, does not require us to repurchase a specific number of shares, and may be modified, suspended, or discontinued at any time. As of June 30, 2020, we have no amount available for repurchase under the Stock Repurchase Program. There were no stock repurchases after June 30, 2020. Item 6.
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. As of December 31, 2022, we have 50.0 million available for repurchase under the December 2022 Stock Repurchase Program.
Purchases of Equity Securities On November 1, 2007, our Board of Directors (the “Board”) authorized the repurchase of up to $50 million of our common stock (the “Stock Repurchase Program”). In addition, on October 22, 2014, the Board authorized another $30 million under the Stock Repurchase Program.
Purchases of Equity Securities On February 23, 2022, our Board of Directors (the "Board") approved a stock repurchase program of up to $30.0 million of our common stock for a period of up to twelve months (the "February 2022 Stock Repurchase Program").
Removed
We may repurchase our common stock for cash in the open market in accordance with applicable securities laws. The timing and amount of any stock repurchase will depend on share price, corporate and regulatory requirements, economic and market conditions, and other factors.
Added
P ursuant to the Agreement, we purchased 904,499 shares of our common stock from Invenomic at $4.725 per share, or an aggregate purchase price of $4.3 million. The closing price of our common stock on February 14, 2022 was $4.80 per share.
Added
We adopted a Section 382 Tax Benefits Preservation Plan on November 17, 2021 to diminish the risk we could experience an “ownership change” as defined in Section 382 of the Internal Revenue Code of 1986, as amended, which could substantially limit or permanently eliminate our ability to utilize its net operating loss carryovers to reduce potential future income tax obligations.
Added
Under this plan, a person who acquires, without the approval of our Board of Directors, beneficial ownership of 4.99% or more of the outstanding common stock could be subject to significant dilution. Following the repurchase, Invenomic’s holdings dropped to below 4.99% of the outstanding common stock.
Added
Any stock repurchases may be made through open market and privately negotiated transactions, at such times and in such amounts as management deems appropriate, including pursuant to one or more Rule 10b5-1 trading plans adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934.
Added
Additionally, the Board authorized the use of any derivative or similar instrument to effect stock repurchase transactions, including without limitation, accelerated share repurchase contracts, equity forward transactions, equity option transactions, equity swap transactions, cap transactions, collar transactions, naked put options, floor transactions or other similar transactions or any combination of the foregoing transactions.
Added
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.
Added
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.
Added
The February 2022 Stock Repurchase Program was terminated on December 29, 2022. 33 Table of Contents Share repurchase activity under the February 2022 Stock Repurchase Program during the three months ended December 31, 2022 was as follows (in thousands, except per share amounts): 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, 2022 278,254 $5.2780 1,468,614 21,521,000 November 1 to November 30, 2022 89,018 $5.4468 484,864 21,035,000 December 1 to December 31, 2022 — N/A — — (1) The amounts represent the amount available to repurchase shares under the authorized repurchase program as of December 31, 2022.
Added
Our stock repurchase program does not obligate it to acquire any specific number of shares. In 2022, we repurchased 1,637,566 shares of our common stock for $8.9 million at an average purchase price of $5.46 per share. The February 2022 Stock Repurchase Program was terminated on December 29,2022.
Added
On December 29, 2022, the Board approved a stock repurchase program of up to $50.0 million of our common stock for a period of up to twelve months (the "December 2022 Stock Repurchase Program"), which terminated and superseded the stock repurchase program that had been approved by our Board of Directors on February 23, 2022.
Added
Any stock repurchases may be made through open market and privately negotiated transactions, at such times and in such amounts as management deems appropriate, including pursuant to one or more Rule 10b5-1 trading plans adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934.
Added
Additionally, the Board authorized the use of any derivative or similar instrument to effect stock repurchase transactions, including without limitation, accelerated share repurchase contracts, equity forward transactions, equity option transactions, equity swap transactions, cap transactions, collar transactions, naked put options, floor transactions or other similar transactions or any combination of the foregoing transactions.
Added
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.
Added
Dividends Payment On November 14, 2022, our Board of Directors ("Board") declared a quarterly dividend in the amount of $0.03 per share, which was paid on January 30, 2023, to stockholders of record on January 15, 2023.
Added
In addition, on December 29, 2022, our Board declared a special dividend in the amount of $0.10 per share, which was paid on January 30, 2023 to stockholders of record on January 15, 2023.
Added
Further, on February 21, 2023, our Board declared a second quarterly dividend, in the amount of $0.03 per share, which will be paid on April 28, 2023 to stockholders of record on April 13, 2023. Item 6. Reserved 34 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

36 edited+22 added−31 removed19 unchanged
Biggest changeBenefit From (Provision For) Income Taxes A summary of benefit from (provision for) income taxes and effective tax rates for the years ended December 31, 2021 and 2020 are as follows (in thousands): Years Ended December 31, 2021 2020 $ Change % Change Income before benefit from (provision for) income taxes $ 17,290 $ 3,159 Benefit from (provision for) income taxes (4,806) 2,242 (7,048) (314) % Effective tax rate 27.8 % (71.0) % In 2021, we recorded a $4.8 million provision for income taxes yielding an effective tax rate of 27.8%.
Biggest changeThe increase in net loss from investments in marketable securities and derivative instruments in 2022 compared to 2021 primarily consisted of a $8.4 million increase in net losses on investment in marketable securities partially offset by a $6.2 million increase in net gains on derivative instruments. 39 Table of Contents Income Taxes A summary of provision for income taxes and effective tax rates for the year ended December 31, 2022, and 2021 are as follows (in thousands): Years Ended December 31, 2022 2021 $ Change % Change Income before benefit from (provision for) income taxes $ 26,965 $ 17,290 Benefit from (provision for) income taxes 3,699 (4,806) 8,505 (177) % Effective tax rate 13.7 % (27.8) % Benefit from income taxes for the year ended December 31, 2022, resulted primarily from estimated domestic and foreign taxes included in the calculation of the effective tax rate.
In the event that we do not ultimately prevail in our appeal in the Korean courts, the deposits included in Long-term deposits would be recorded as additional income tax expense on our 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, the deposit included in Long-term deposits would be recorded as additional income tax expense on our Consolidated Statements of Income and Comprehensive Income , in the period in which we do not ultimately prevail.
Realized gains and losses on marketable equity and debt securities are recorded in Other income (expense), net on the Consolidated Statements of Income and Other Comprehensive Income (Loss). Unrealized gains and losses on marketable equity securities (including mutual funds) are reported as Other income (expense), net on our Consolidated Statement of Income and Other Comprehensive Income (Loss).
Realized gains and losses on marketable equity securities and marketable debt securities are recorded in Other income (expense), net on the Consolidated Statements of Income and Comprehensive Income . Unrealized gains and losses on marketable equity securities (including mutual funds) are reported as Other income (expense), net on our Consolidated Statement of Income and Comprehensive Income.
Per-unit Royalty revenue As we generally do not receive the per-unit licensee royalty reports for sales during a given quarter within the time frame that allows us to adequately review the reports and include the actual amounts in our quarterly results for such quarter, we accrue the related revenue based on estimates of our licensees’ underlying sales, subject to certain constraints on our ability to estimate such amounts.
Per-unit Royalty revenue As we may not receive the per-unit licensee royalty reports for sales during a given quarter within the time frame that allows us to adequately review the reports and include the actual amounts in our quarterly results for such quarter, we accrue the related revenue based on estimates of our licensees’ underlying sales, subject to certain constraints on our ability to estimate such amounts.
We expect to be reimbursed by both Samsung and LGE to the extent we ultimately prevail or prevailed in the appeal in the Korean courts. We regularly assess the likelihood that we will prevail in these cases against the South Korean tax authorities and consequently the likelihood that these deposits will be recoverable.
We expect to be reimbursed by LGE to the extent we ultimately prevail or prevailed in the appeal in the Korean courts. We regularly assess the likelihood that we will prevail in this case against the South Korean tax authorities and consequently the likelihood that this deposit will be recoverable.
Resolution of legal matters in a manner inconsistent with management’s expectations could have a material impact on our financial condition and operating results. 37 Table of Contents Results of Operations Overview Total revenues for 2021 were $35.1 million, an increase of $4.6 million, or 15%, compared to 2020.
Resolution of legal matters in a manner inconsistent with management’s expectations could have a material impact on our financial condition and operating results. 36 Table of Contents Results of Operations Overview Total revenues in 2022 were $38.5 million, an increase of $3.4 million, or 9.6%, compared to 2021.
Contingencies of the Notes to the Consolidated Financial Statements, we have made deposit payments to reimburse both Samsung and LGE for withholding taxes and related penalties paid by them as a result of 36 Table of Contents assessments they have received from the South Korean tax authorities. These payments are recorded as Long-term deposits on our Consolidated Balance Sheets .
Contingencies of the Notes to the Consolidated Financial Statements, we have made a deposit payment to reimburse LGE for withholding taxes and related penalties paid by LGE as a result of an assessment LGE have received from the South Korean tax authorities. This payment is recorded as Long-term deposits on our Consolidated Balance 35 Table of Contents Sheets .
The following table sets forth our consolidated statements of income data as a percentage of total revenues: Years Ended December 31, 2021 2020 Revenues: Per-Unit royalty revenue 98.9 % 99.1 % Fixed fee license revenue 1.1 0.9 Royalty and license 100.0 100.0 Development, services, and other — — Total revenues 100.0 100.0 Costs and expenses: Cost of revenues 0.3 0.6 Sales and marketing 9.2 16.4 Research and development 11.8 16.4 General and administrative 28.0 59.3 Total costs and expenses 49.3 92.7 Operating income 50.7 7.3 Interest and other income 3.5 0.9 Other income (expense), net (4.9) 2.2 Income from operations before benefits from (provision for) income taxes 49.3 10.4 Benefit from (provision for) income taxes (13.7) 7.3 Net income 35.6 % 17.7 % 38 Table of Contents Revenues Our revenue is primarily derived from fixed fee license agreements and per-unit royalty agreements, along with less significant revenue earned from development, services and other revenue.
The following table sets forth our Consolidated Statements of Income and Comprehensive Income data as a percentage of total revenues: Years Ended December 31, 2022 2021 Revenues: Total royalty and license revenue 99 % 99 % Development, services, and other 1 1 Total revenues 100 100 Costs and expenses: Cost of revenues — — Sales and marketing 3 9 Research and development 3 12 General and administrative 30 28 Total costs and expenses 36 49 Operating income 64 51 Interest and other income 7 4 Other income (expense), net (1) (2) Income before benefit from (provision for) income taxes 70 50 Benefit from (provision for) income taxes 10 (14) Net income 80 % 36 % 37 Table of Contents Revenues Our revenue is primarily derived from fixed fee license agreements and per-unit royalty agreements, along with less significant revenue earned from development, services and other revenue.
We did not have any other significant non-cancellable purchase commitments as of December 31, 2021. We anticipate that capital expenditures for property and equipment in 2022 will be less than $1.0 million.
In addition, interest and penalty of $0.1 million could also be payable in cash in relation to the unrecognized tax benefits. We did not have any other significant non-cancellable purchase commitments as of December 31, 2022. We anticipate that capital expenditures for property and equipment for 2023 will be less than $1.0 million.
The closing price of our common stock on February 14, 2022 was $4.80 per share. On February 23, 2022, our Board of Directors approved a stock repurchase program of up to $30 million of our common stock for a period of up to twelve months. See Note 13.
On February 23, 2022, our Board of Directors (the "Board") approved a stock repurchase program of up to $30 million of our common stock for a period of up to twelve months (the "February 2022 Stock Repurchase Program").
While the unprecedented public health and governmental efforts to contain the spread of COVID-19 have created significant uncertainty as to general economic and capital market conditions in 2021 and beyond, as of February 25, 2022, the date of this Annual Report on Form 10-K, we believe we have sufficient capital resources to meet our working capital needs for the next twelve months and beyond. 44 Table of Contents Recent Accounting Pronouncements See Note 1 Significant Accounting Policies of the N otes to Consolidated Financial Statements for information regarding the effect of new accounting pronouncements on our financial statements.
While the unprecedented public health and governmental efforts to contain the spread of COVID-19 have created significant uncertainty as to general economic and capital market conditions in 2022 and beyond, as of February 22, 2023, the date of this Annual Report on Form 10-K, we believe we have sufficient capital resources to meet our working capital needs for the next twelve months and beyond.
Total cash, cash equivalents, and short-term investments were $137.9 million as of December 31, 2021 of which approximately 38% ($19.7 million) was held by our foreign subsidiaries and subject to repatriation tax effects.
Total cash, cash equivalents, and investments-current were $149.7 million as of December 31, 2022 of which approximately 21%, or $31.7 million, was held by our foreign subsidiaries and subject to repatriation tax effects.
As described above, we continue to maintain a valuation allowance of $27.2 million against certain of our deferred tax assets, including all federal, state and certain foreign deferred tax assets in the United States and Canada as a result 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.
We put partial valuation allowance for certain federal assets, whose future realization is not more likely than not and continue to maintain full valuation allowance for state and certain foreign deferred tax assets in the United States and Canada as a result 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.
General and administrative expenses decreased $8.2 million, or 46%, in 2021 as compared to 2020 primarily due to a $4.4 million decrease in compensation, benefits and other personnel related costs, a $1.6 million decrease in legal costs, a $1.0 million decrease in consulting and professional services fees, a $0.5 million decrease in depreciation expense and a $0.5 million decrease in facilities costs.
General and administrative expenses increased $1.6 million, or 16%, in 2022 as compared to 2021 primarily due to a $2.7 million increase in compensation, benefits and other personnel related costs partially offset by a $0.6 million decrease in legal costs and a $0.5 million decrease in consulting and professional services.
Net cash provided by financing activities during 2021 was $62.2 million primarily consisting of $59.2 million net proceeds from common stock issuances and $2.9 million proceeds from stock option exercises.
Net cash provided by financing activities during the year ended December 31, 2021 was $62.2 million primarily consisting of $59.2 million of net proceeds from common stock issuances and $3.0 million cash proceeds from stock option exercises and stock purchases under our employee stock purchase plan.
Cash, cash equivalents and short-term investments As of December 31, 2021, our cash, cash equivalents, and short-term investments totaled $137.9 million, an increase of $78.4 million from $59.5 million on December 31, 2020. 42 Table of Contents A summary of select cash flow information for the years ended December 31, 2021 and 2020 (in thousands): December 31, 2021 2020 Net cash provided by operating activities $ 17,449 $ 22 Net cash provided by (used in) investing activities $ (87,684) $ 2,953 Net cash provided by (used in) financing activities $ 62,203 $ (29,931) Cash provided by operating activities - Our operating activities primarily consists of net income adjusted for certain non-cash items including depreciation and amortization; stock-based compensation expense, deferred income taxes and the effect of changes in operating assets and liabilities.
A summary of select cash flow information for the years ended December 31, 2022 and 2021 (in thousands): Years Ended December 31, 2022 2021 Net cash provided by operating activities $ 40,146 $ 17,449 Net cash used in investing activities $ (29,405) $ (87,684) Net cash provided by (used in) financing activities $ (13,411) $ 62,203 Cash provided by operating activities - Our operating activities primarily consists of net income adjusted for certain non-cash items including depreciation and amortization; stock-based compensation expense, deferred income taxes and the effect of changes in operating assets and liabilities.
The decrease facilities and depreciation expenses in 2021 compared to 2020 was driven by factors discussed above. General and Administrative - Our general and administrative expenses primarily consisted of employee compensation and benefits including stock-based compensation; legal other professional fees; external legal costs for patents; office expense; travel; and allocated facilities costs.
The decrease in compensation, benefits and other personnel related costs were largely attributable to lower headcount and decreases in stock-based compensation expense and severance costs. General and Administrative - Our general and administrative expenses primarily consisted of employee compensation and benefits including stock-based compensation; legal other professional fees; external legal costs for patents; office expense; travel; and allocated facilities costs.
Unrealized gains and losses on marketable debt securities reported as a component of Accumulated other comprehensive income on our Consolidated Balance Sheets .
Unrealized gains and losses on marketable debt securities reported as a component of Accumulated other comprehensive income(loss) on our Consolidated Balance Sheets . Certificates of deposit are reported as Investments-current or Investments -noncurrent based on their term when purchased.
Our intent is to permanently reinvest a majority of our earnings from foreign operations, and current plans do not anticipate that we will need funds generated from foreign operations to fund our domestic operations. We may continue to invest in, protect, and defend our extensive IP portfolio, which can result in the use of cash in the event of litigation.
Our intent is to permanently reinvest a majority of our earnings from foreign operations, and current plans do not anticipate that we will need funds generated from foreign operations to fund our domestic operations.
Total cost and operating expenses were $17.3 million, a decrease of $10.9 million, or 39% compared to 2020. In 2021, we had net income of $12.5 million, an increase of $7.1 million, or 131.1% compared to 2020.
Total cost and operating expenses were $14.0 million, a decrease of $3.3 million or 18.9% compared to 2021. In 2022, we had net income of $30.7 million, an increase of $18.2 million, or 145.6% compared to 2021.
We also anticipate that our royalty revenue will fluctuate relative to our customers’ unit shipments. Geographically, revenues generated in Asia, North America and Europe for the year ended December 31, 2021 represented 76%, 12%, and 12%, respectively, of our total revenue as compared to 76%, 16%, and 8%, respectively, for the year ended December 31, 2020.
Geographically, revenues generated in Asia, North America and Europe for the year ended December 31, 2022, represented 62%, 28%, and 10%, of our total revenue as compared to 76%, 12%, and 12%, respectively, for the year ended December 31, 2021.
The increase in net cash provided by operating activities was primarily attributable to a $7.1 million increase in net income, a $0.4 million increase resulted from changes in non cash items and a $7.2 million increase resulted from the change in net operating assets and liabilities.
This cash increase was primarily attributable to a $18.2 million increase in net income and a $9.4 million increase from changes in net operating assets partially offset by a $5.1 million decrease from changes in non-cash items.
The decrease in advertising and travel related costs was primarily due to reduced business activities and travel restrictions during COVID 19 pandemic. Research and Development - Our research and development expenses primarily consisted of employee compensation and benefits, including stock-based compensation; outside services and consulting fees; tooling and supplies; and allocated facilities costs.
The decrease in compensation, benefits and other personnel-related costs were due to lower headcount and decreases in variable compensation expense. 38 Table of Contents Research and Development - Our research and development expenses primarily consisted of employee compensation and benefits, including stock-based compensation; outside services and consulting fees; tooling and supplies; and allocated facilities costs.
As of December 31, 2021, we had unrecognized tax benefits under ASC 740 of approximately $7.6 million and applicable interest of $0. The total amount of unrecognized tax benefits that would affect our effective tax rate, if recognized, is $0. We account for interest and penalties related to uncertain tax positions as a component of income tax provision.
The total amount of unrecognized tax benefits that would affect our effective tax rate, if recognized, is $1.4 million. We 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.
A revenue summary for the years ended December 31, 2021 and 2020 are as follows (in thousands, except for percentages): Years Ended December 31, 2021 2020 $ Change % Change Revenues: Fixed fee license revenue $ 5,843 $ 5,472 $ 371 7% Per-unit royalty revenue 28,846 24,704 4,142 17% Total royalty and license revenue 34,689 30,176 4,513 15% Development, services, and other revenue 400 280 120 43% Total revenues $ 35,089 $ 30,456 $ 4,633 15% Royalty and license revenue Per-unit royalty revenue increased by $4.1 million, or 17%, in 2021 compared to 2020, primarily caused by a $3.0 million increase in royalties from gaming licensees and a $1.8 million increase royalties from automotive licensees partially offset by a $0.4 million decrease in royalties from our mobility licensees.
A revenue summary for the years ended December 31, 2022, and 2021 are as follows (in thousands, except for percentages): Years Ended December 31, 2022 2021 $ Change % Change Fixed fee license revenue $ 11,953 $ 5,843 $ 6,110 105% Per-unit royalty revenue 26,225 28,846 (2,621) (9)% Total royalty and license revenue 38,178 34,689 3,489 10% Development, services, and other revenue 283 400 (117) (29)% Total revenues $ 38,461 $ 35,089 $ 3,372 10% Fixed fee license revenue increased $6.1 million, or 105% in 2022 compared to 2021, primarily attributable to a $6.4 million increase in mobility revenue partially offset by a $0.3 million decrease in other license revenue.
Operating Expenses A summary of operating expenses for the years ended December 31, 2021 and 2020 are as follows: Years Ended December 31, 2021 2020 $ Change % Change Sales and marketing $ 3,241 $ 4,999 $ (1,758) (35) % Research and development 4,150 5,014 (864) (17) % General and administrative 9,835 18,055 (8,220) (46) % Sales and Marketing - Our sales and marketing expenses primarily consisted of employee compensation and benefits, including stock-based compensation; sales commissions; advertising and trade shows; collateral marketing materials; market development funds; travel; and allocated facilities costs. 39 Table of Contents Sales and marketing expenses decreased $1.8 million, or 35%, in 2021 as compared to 2020 primarily attributable to a $0.7 million decrease in compensation, benefits, and other related costs, a $0.3 million decrease in facilities expense, a $0.3 million decrease in depreciation expense and a $0.2 million decrease in marketing and advertising costs.
Operating Expenses A summary of operating expenses for the years ended December 31, 2022, and 2021 are as follows (in thousands, except for percentages): Years Ended December 31, 2022 2021 $ Change % Change Sales and marketing $ 1,215 3,241 $ (2,026) (63) % Research and development 1,380 4,150 (2,770) (67) % General and administrative 11,442 9,835 1,607 16 % Sales and Marketing - Our sales and marketing expenses primarily consisted of employee compensation and benefits, including stock-based compensation; sales commissions; advertising; collateral marketing materials; market development funds; travel; and allocated facilities costs.
The decrease in legal expense was primarily attributable to reduced activities, as well as a decrease in patent maintenance and prosecution costs. The decrease in consulting and professional services fees was due to decreases in accounting and audit fees and consulting and other professional fees in 2021 compared to 2020.
The increases in compensation, benefits and other personnel related costs in 2022 compared to 2021 were driven by increases in stock-based compensation expense and higher variable compensation. The decrease in legal expense in 2022 compared to 2021 was primarily attributable to reduced activities, as well as a decrease in patent maintenance and prosecution costs.
We do not expect to have any significant changes to unrecognized tax benefits during the next twelve months. Liquidity and Capital Resources Our cash equivalents and short-term investments consist primarily of market funds, investment in equity marketable securities (including mutual funds). All investments are stated at market value.
Liquidity and Capital Resources Our cash equivalents, investments - current and investments - noncurrent consist primarily of money-market funds, investment in equity and debt marketable securities (including mutual funds) and certificates of deposit. All marketable securities are stated at market value.
We expect royalty and license revenue to continue to be a major component of our future revenue as our technology is included in products and we succeed in our efforts to monetize our IP. Our fixed fee license revenue could fluctuate depending upon the timing of execution of new fixed license fee arrangements.
These decreases were partially offset by a $1.7 million increase in royalties from other licensees and a $0.7 million increase in royalties from gaming licensees. We expect royalty and license revenue to continue to be a major component of our future revenue as our technology is included in products and we succeed in our efforts to monetize our IP.
Net cash used in investing activities during 2021 was $87.7 million primarily consisting of $112.2 million in purchases of marketable securities partially offset by $20.4 million in proceeds from selling marketable securities. Net cash provided by investing activities during 2020 was $3.0 million primarily consisting of proceeds from maturities of short-term investments.
Net cash used in investing activities during the year ended December 31, 2021 was $87.7 million primarily consisting of $123.4 million of purchases marketable securities and in the settlement of derivative instrument partially offset by $36.1 million of proceeds from sale of derivative instruments.
Net cash provided by operating activities was $17.4 million during 2021, a $17.4 million increase in 2021 compared to 2020.
Net cash provided by operating activities was $40.1 million in the year ended December 31, 2022, a $22.7 million increase compared to the same period in 2021.
Based upon our assessment as of December 31, 2021 of the realizability of our deferred tax assets, 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.
We put partial valuation allowance for certain federal assets, whose future realization is not more likely than not and continue to maintain full valuation allowance for state deferred tax assets in the United States as well as federal tax assets in Canada.
The 2021 provision reflects estimated U.S. taxes, adjustments to uncertain tax positions withholding tax reserve, foreign taxes and foreign withholding taxes. Based on our assessment of the developments in the Samsung case (South Korea withholding taxes) in October of 2021, we provided for an additional income tax expense of $3.3 million in the fourth quarter of 2021.
Provision for income taxes for the years ended December 31, 2021 primarily consisted of estimated U.S. taxes, adjustments to uncertain tax positions withholding tax reserve, foreign taxes and foreign withholding taxes.
Interest and other income increased $1.0 million during 2021 compared to 2020 primarily driven by higher in interest and dividend income from investments in marketable securities in 2021 compared to 2020. Other Income (Expense), Net - Other income (expense), net consists primarily of realized and unrealized gains (losses) on marketable equity securities, foreign currency transactions and translation gains (losses).
Interest and other income increased $2.5 million during the 2022 compared to 2021 primarily driven by a $4.7 million increase in interest and dividend income partially offset by a $2.2 million increase in net loss from investments in marketable securities and derivative instruments.
Research and development expenses decreased $0.9 million, or 17%, in 2021 compared to 2020 primarily due to a $0.2 million decrease in each of the consulting and outside services costs, facilities related costs and depreciation expense. The decrease in consulting and outside services cost in 2021 compared 2020 was largely due to lower consultant headcount.
Research and development expenses decreased $2.8 million, or 67%, in 2022 compared to 2021, primarily attributable to a $2.4 million decrease in compensation, benefits and other personnel related costs and a $0.2 million decrease in office expenses.
Net cash used in financing activities during 2020 was $29.9 million primarily consisting of $30.6 million in cash paid for stock repurchases partially offset by $0.71 cash proceeds from stock option exercises and stock purchases under our employee stock purchase plan.
Net cash used in investing activities during the year ended December 31, 2022,was $29.4 million primarily consisting of $165.4 million in cash used to purchase marketable securities and in the settlement of derivative instrument partially offset by $136.0 million in proceeds from selling marketable securities and derivatives.
Removed
Fixed fee license revenue increase $0.4 million or 7% in 2021 compared to 2020 primarily due to a $0.2 million increase in mobility license revenue and a $0.2 million increase in automotive license revenue.
Added
Per-unit royalty revenue decreased by $2.6 million, or 9%, in 2022 compared to 2021, primarily caused by a $3.1 million decrease in royalties from mobility licensees and a $1.8 million decrease in royalties from automotive licensees.
Removed
The decrease in compensation, benefits and other personnel related costs primarily attributable to lower headcount in 2021 compared to 2020. The decrease in facilities expenses was largely attributable to lower rent expense following the sublease of the SJ Facility in the second quarter of 2020.
Added
Our fixed fee license revenue could fluctuate depending upon the timing of execution of new fixed license fee arrangements. We also anticipate that our royalty revenue will fluctuate relative to our customers’ unit shipments.
Removed
The decrease in depreciation expense was largely due to the accelerated depreciation in the first quarter of 2020 resulting from the shortening in estimated useful life of the leasehold improvements of the San Jose, California office ("SJ Facility") to March 31, 2020 following our decision to exit this facility.
Added
Sales and marketing expenses decreased $2.0 million, or 63%, in 2022 compared to 2021, primarily attributable to a $1.7 million decrease in compensation, benefits and other personnel related costs and a $0.2 million decrease in advertising and marketing expenses.
Removed
The decrease in compensation, benefits and other personnel related costs was primarily due to reduced headcount and lower salaries driven by the transition of our Accounting, Human Resources, Finance and IT functions from San Jose, California to Montreal, Canada and lower stock-based compensation expense.
Added
We may be required to engage in litigation to protect our IP, in which case our general and administrative expenses could substantially increase reflecting such litigation costs.
Removed
The decrease in depreciation expense and facilities costs were primarily driven by the factors discussed above.
Added
Interest and Other Income (Loss) A summary of interest and other income, other expense for the years ended December 31, 2022, and 2021 are as follows (in thousands): Years Ended December 31, 2022 2021 $ Change % Change Interest and other income (loss), net 2,838 374 $ 2,464 659 % Other income (expense), net (293) (859) 566 (66) % $ 2,545 $ (485) $ 3,030 (625) % Interest and Other Income (loss) - Interest and other income (loss) consists primarily of interest and dividend income from cash and cash equivalents, marketable debt and equity securities, realized and unrealized gains (losses) on our marketable equity securities and derivative instruments and realized gains (losses) on our marketable debt securities.
Removed
While we currently expect our general and administrative expenses to decrease in the near future as we achieve targeted reductions in consulting and professional services, headcount, and other costs, we may be required to engage in litigation to protect our IP, in which case our general and administrative expenses could substantially increase to reflect such litigation costs. 40 Table of Contents Interest and Other Income, Other Expense A summary of interest and other income, other expense for the years ended December 31, 2021 and 2020 are as follows (in thousands): Years Ended December 31, 2021 2020 $ Change % Change Interest and other income $ 1,244 $ 271 $ 973 359 % Other income (expense), net $ (1,729) $ 668 $ (2,397) (359) % Interest and Other Income - Interest and other income consists primarily of interest income from cash and cash equivalents and short-term investments.
Added
The increase in interest and dividend income in 2022 compared to 2021 was largely attributable to higher interest and dividend income from investments as well as interest income from a Korean tax litigation settlement.
Removed
Other income (expense), net decreased $2.4 million in 2021 compared to 2020 primarily due to a $1.2 million increase in unrealized foreign currency translation loss and $0.9 million in loss on marketable equity securities. The increase in unrealized foreign currency translation loss was attributable to the depreciation of South Korean Won against the U.S. Dollar.
Added
As a result, a benefit of $5.7 million generated from our U.S. territory was included in the calculation of the effective tax rate, which was the main reason for the difference between the statutory tax rate and actual effective tax rate.
Removed
The loss on marketable securities primarily consisted of $1.6 million net unrealized loss on marketable equity securities and a $0.7 million realized gain on marketable equity securities. The increases in unrealized losses and realized gains on marketable equity securities was largely attributable to the commencement of investment activities in the second half of 2021.
Added
The year-over-year change in provision for income taxes resulted primarily from the change in income from continuing operations across various tax jurisdictions.
Removed
Of this amount, $2.2 million was recorded as an impairment to the Long-term deposit and $1.1 million was accrued as an Other current liability on our Consolidated Statements Balance Sheet at December 31, 2021.
Added
As of December 31, 2022, we had unrecognized tax benefits under ASC 740 Income Taxes of approximately $7.1 million, of which $1.4 million could be payable in cash. In addition, interest and penalty $0.1 million could also be payable in cash in relation to the unrecognized tax benefits.
Removed
As of December 31, 2021, the aggregating balance of our deferred tax assets totaled $29.0 million with a valuation allowance of $27.2 million, resulting in a net deferred tax asset balance of $1.8 million. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was passed into law.
Added
Interest income from certificates of deposit are reported as Interest and other income (loss), net on the Consolidated Statement of Income and Comprehensive Income. 40 Table of Contents Cash, cash equivalents and investments- As of December 31, 2022, our cash, cash equivalents, and investments-current totaled $149.7 million, an increase of $11.8 million from $137.9 million on December 31, 2021.
Removed
The 41 Table of Contents CARES Act includes several significant business tax provisions including modification to the taxable income limitation for utilization of net operating losses (“NOLs”) incurred in 2019 and 2020 and the ability to carry back NOLs from those years for a period of up to five years, an increase to the limitation on deductibility of certain business interest expense, bonus depreciation for purchases of qualified improvement property and special deductions on certain corporate charitable contributions.
Added
Net cash used by financing activities during the year ended December 31, 2022 was $13.4 million primarily consisting of cash paid for stock repurchases.
Removed
We analyzed the provisions of the CARES Act and determined there was no net effect on our provision for the year ended December 31, 2020. In 2020, we recorded a $2.2 million benefit from income taxes yielding an effective tax rate of (71.0)%.
Added
We intend to continue to invest in, protect, and defend our extensive IP portfolio, which can result in the use of cash in the event of litigation.
Removed
The 2020 provision reflects estimated foreign taxes and foreign withholding tax expense and a one-time deferred tax benefit from the release of valuation allowance from one of our foreign entities.
Added
On December 29, 2022, the Board approved a stock repurchase program of up to $50 million of our common stock for a period of up to twelve months (the "December 2022 Stock Repurchase Program"), which terminated and superseded the stock repurchase program that 41 Table of Contents had been approved by our Board of Directors on February 23, 2022.
Removed
Based upon our assessment as of December 31, 2020 of the realizability of our deferred tax assets in the United States, we reported a full valuation allowance against all of our federal and state and certain of our foreign net deferred tax assets.
Added
Any stock repurchases may be made through open market and privately negotiated transactions, at such times and in such amounts as management deems appropriate, including pursuant to one or more Rule 10b5-1 trading plans adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934.
Removed
As of December 31, 2020, the aggregating balance of our deferred tax assets totaled $30.8 million with a valuation allowance of $28.5 million, resulting in a net deferred tax asset balance of $2.6 million.
Added
Additionally, the Board authorized the use of any derivative or similar instrument to effect stock repurchase transactions, including without limitation, accelerated share repurchase contracts, equity forward transactions, equity option transactions, equity swap transactions, cap transactions, collar transactions, naked put options, floor transactions or other similar transactions or any combination of the foregoing transactions.
Removed
On February 3, 2021, we filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission which provided us with the flexibility to raise up to $250 million of capital.
Added
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.
Removed
We intend to use the net proceeds from the sale of the securities offered by this prospectus for working capital and other general corporate purposes, and we may use a portion of any net proceeds for investment in complementary businesses or alternative currencies.
Added
The stock repurchase program does not obligate Immersion to repurchase any dollar amount or number of shares, and the program may be suspended or discontinued at any time. In the year ended December 31, 2022, we repurchased 1,637,566 shares of our common stock for $8.9 million at an average purchase price of $5.46 per share.
Removed
On February 11, 2021, we entered into an equity distribution agreement (the "February 2021 Distribution Agreement") with Craig-Hallum Capital Group LLC (“Craig-Hallum”), as sales agent to issue and sell shares of our common stock having an 43 Table of Contents aggregated offering price of up to $50 million.
Added
The February 2022 Stock Repurchase Program was terminated on December 29, 2022 As of December 31, 2022, we have $50.0 million available for future repurchase under the December 2022 Stock Repurchase Program.
Removed
Under the terms of the February 2021 Distribution Agreement, we were obligated to pay a 2.25% commission on the gross sales proceeds from common stock sold and customary indemnification rights and the reimbursement of legal fees and disbursements.
Added
On November 14, 2022, our Board of Directors ("Board") declared a quarterly dividend in the amount of $0.03 per share, was paid on January 30, 2023 to stockholders of record on January 15, 2023. The Board reserves the right to adjust or withdraw our quarterly dividend in future periods as it reviews the capital allocation strategy from time-to-time .
Removed
During the first quarter of 2021, we sold 3.3 million shares of our common stock pursuant to the February 2021 Distribution Agreement and we received net proceeds of $35.9 million from the offering net of $1.2 million of commissions and other offering costs. We terminated the February 2021 Distribution Agreement on March 5, 2021.
Added
In addition, on December 29, 2022, our Board declared a special dividend in the amount of $0.10 per share, which was paid on January 30, 2023 to stockholders of record on January 15, 2023.
Removed
On July 6, 2021, we entered into an equity distribution agreement (the "July 2021 Distribution Agreement") with Craig-Hallum Capital Group LLC (“Craig-Hallum”), as sales agent to issue and sell shares of our common stock having an aggregated offering price of up to $60 million.
Added
Further, on February 21, 2023, our Board declared a second quarterly dividend, in the amount of $0.03 per share, which will be paid on April 28, 2023 to stockholders of record on April 13, 2023. On December 31, 2022, we had a liability for unrecognized tax benefits totaling $7.1 million, of which $1.4 million could be payable in cash.
Removed
Under the July 2021 Distribution Agreement, we will set the parameters for the sale of shares, including the number of shares to be issued, the time period during which sales are requested to be made, limitations on the number of shares that may be sold in any one trading day and any minimum price below which sales may not be made.
Added
Recent Accounting Pronouncements See Note 1 Significant Accounting Policies of the Notes to Consolidated Financial Statements for information regarding the effect of new accounting pronouncements on our financial statements.

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