Immersion 10QT 2024 Q1 Quarterly report for transitional period

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QT

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

For the quarterly period ended _____________

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

For the transition period from January 1, 2024 to April 30, 2024

Commission File Number 000-38334

Immersion Corporation

(Exact name of registrant as specified in its charter)

Delaware

94-3180138

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2999 N.E. 191st Street, Suite 610, Aventura, FL, 33180

(Address of principal executive offices, zip code)

(408) 467-1900

(Registrant’s telephone number, including area code)

Former Fiscal Year, December 31

(Former name, former address and former fiscal year, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Number of shares of common stock outstanding at November 1, 2024 was 32,275,705.

Explanatory Note

On September 27, 2024, the Board of Directors of Immersion Corporation (the “Company”) approved a change in the Company’s fiscal year end from December 31 to April 30, effective immediately. In connection with this change, this Transition Report on Form 10-QT includes the financial information for the transition period from January 1, 2024 to April 30, 2024.

IMMERSION CORPORATION

TABLE OF CONTENTS

PART I		1
FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Unaudited Condensed Consolidated Balance Sheets as of April 30, 2024 and December 31, 2023	1
	Unaudited Condensed Consolidated Statements of Income and Comprehensive Income for the Four Months Ended April 30, 2024 and Three Months Ended March 31, 2023	2
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity, for the Four Months Ended April 30, 2024 and Three Months Ended March 31, 2023	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the Four Months Ended April 30, 2024 and Three Months Ended March 31, 2023	4
	Unaudited Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Control and Procedures	32
PART II
OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 6	Exhibits	37
Signatures		38

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PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

IMMERSION CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except for number of shares)

(Unaudited)

		April 30, 2024			December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	85,521		$	56,071
Investments - current		92,848			104,291
Accounts and other receivables, net		3,138			2,241
Prepaid expenses and other current assets		9,101			9,847
Total current assets		190,608			172,450
Property and equipment, net		164			211
Investments - noncurrent		46,545			33,350
Long-term deposits		6,324			6,231
Deferred tax assets		2,793			3,343
Other assets		87			146
Total assets	$	246,521		$	215,731
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	55		$	47
Accrued compensation		4,003			3,127
Deferred revenue - current		12,494			4,239
Other current liabilities		13,654			11,900
Total current liabilities		30,206			19,313
Deferred revenue - noncurrent		7,978			8,390
Other long-term liabilities		7,107			4,926
Total liabilities		45,291			32,629
Commitments and contingencies (Note 5)
Stockholders’ equity:
Common stock – $0.001 par value; 100,000,000 shares authorized; 48,047,329 and 47,636,273 shares issued, respectively; 31,854,837 and 31,528,977 shares outstanding, respectively		48			48
Additional paid-in capital		322,786			322,134
Accumulated other comprehensive income		2,019			1,702
Accumulated deficit		(18,263	)		(36,040	)
Treasury stock at cost: 16,192,492 and 16,107,296 shares, respectively)		(105,360	)		(104,742	)
Total stockholders’ equity		201,230			183,102
Total liabilities and stockholders’ equity	$	246,521		$	215,731

See accompanying Notes to Condensed Consolidated Financial Statements.

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IMMERSION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(In thousands, except per share amounts)

(Unaudited)

		Four Months Ended April 30, 2024			Three Months Ended March 31, 2023
Revenues:
Royalty and license	$	45,782		$	7,009
Development, services, and other		—			65
Total revenues		45,782			7,074
Operating expenses:
Sales and marketing		1,713			96
Research and development		46			130
General and administrative		27,990			3,589
Total operating expenses		29,749			3,815
Operating income		16,033			3,259
Interest and other income, net		8,543			6,526
Income before provision for income taxes		24,576			9,785
Provision for income taxes		(6,799	)		(1,507	)
Net income	$	17,777		$	8,278
Basic net income per share	$	0.56		$	0.25
Shares used in calculating basic net income per share		31,729			32,603
Diluted net income per share	$	0.55		$	0.25
Shares used in calculating diluted net income per share		32,108			33,085
Other comprehensive income, net of tax
Change in unrealized gains on available-for-sale securities		317			375
Total comprehensive income	$	18,094		$	8,653

See accompanying Notes to Condensed Consolidated Financial Statements.

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IMMERSION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except number of shares)

(Unaudited)

	Four Months Ended April 30, 2024
	Common Stock							Accumulated Other Comprehensive Income		Accumulated Earnings (Deficit)		Treasury Stock					Total Stockholders’ Equity
	Shares		Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Income		Accumulated Earnings (Deficit)		Shares		Amount			Total Stockholders’ Equity
Balances at December 31, 2023	47,636,273	$	48	$	322,134		$	1,702	$	(36,040	)	16,107,296	$	(104,742	)	$	183,102
Net income	—		—		—			—		17,777		—		—			17,777
Unrealized gain on available-for-sale securities, net of taxes	—		—		—			317		—		—		—			317
Release of restricted stock units and awards, net of shares withheld	330,379		—		—			—		—		85,196		(618	)		(618	)
Shares issued to an employee in lieu of cash compensation	80,677		—		554			—		—		—		—			554
Dividends declared	—		—		(1,502	)		—		—		—		—			(1,502	)
Stock-based compensation	—		—		1,600			—		—		—		—			1,600
Balances at April 30, 2024	48,047,329	$	48	$	322,786		$	2,019	$	(18,263	)	16,192,492	$	(105,360	)	$	201,230

	Three Months Ended March 31, 2023
	Common Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Income		Accumulated Earnings (Deficit)		Treasury Stock					Total Stockholders’ Equity
	Shares		Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Income		Accumulated Earnings (Deficit)		Shares		Amount			Total Stockholders’ Equity
Balances at December 31, 2022	46,974,598	$	47	$	322,667		$	202	$	(70,016	)	14,727,582	$	(95,200	)	$	157,700
Net income	—		—		—			—		8,278		—		—			8,278
Unrealized gains on available-for-sale securities, net of taxes	—		—		—			375		—		—		—			375
Release of restricted stock units and awards, net of shares withheld	401,955		—		—			—		—		97,936		(757	)		(757	)
Issuance of stock for ESPP purchase	1,298		—		6			—		—		—		—			6
Shares issued to an employee in lieu of cash compensation	50,643		—		385			—		—		—		—			385
Dividends declared	—		—		(1,204	)		—		—		—		—			(1,204	)
Stock-based compensation	—		—		946			—		—		—		—			946
Balances at March 31, 2023	47,428,494	$	47	$	322,800		$	577	$	(61,738	)	14,825,518	$	(95,957	)	$	165,729

See accompanying Notes to Condensed Consolidated Financial Statements.

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IMMERSION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


		Four Months Ended April 30, 2024			Three Months Ended March 31, 2023
Operating activities:
Net income	$	17,777		$	8,278
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation of property and equipment		62			172
Stock-based compensation		1,600			946
Deferred income taxes		2,690			—
Net gains on investment in marketable securities		(3,217	)		(3,683	)
Net gain on derivative instruments		(2,096	)		(615	)
Shares issued to an employee in lieu of cash compensation		554			385
Other noncash		(65	)		(26)
Changes in operating assets and liabilities:
Accounts and other receivables		(761	)		(501	)
Prepaid expenses and other current assets		748			383
Long-term deposits		(206	)		18
Other assets		110			113
Accounts payable		3			(68	)
Accrued compensation		877			(1,259	)
Other current liabilities		5,684			602
Deferred revenue		7,843			(1,189	)
Other long-term liabilities		—			(33	)
Net cash provided by operating activities		31,603			3,523
Investing activities:
Purchases of marketable securities and other investments		(58,848	)		(54,954	)
Proceeds from sale or maturities of marketable securities and other investments		60,698			30,771
Proceeds from sale of derivative instruments		4,377			5,844
Payments for settlement of derivative instruments		(4,771	)		(1,369	)
Net cash provided by (used in) investing activities		1,456			(19,708	)
Financing activities:
Dividend payments to stockholders		(2,992	)		(4,400	)
Shares withheld to cover payroll taxes		(617	)		(757	)
Other financing activities		—			6
Net cash used in financing activities		(3,609	)		(5,151	)
Net increase (decrease) in cash and cash equivalents		29,450			(21,336	)
Cash and cash equivalents:
Beginning of period		56,071			48,820
End of period	$	85,521		$	27,484

See accompanying Notes to Condensed Consolidated Financial Statements.

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IMMERSION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

		Four Months Ended April 30, 2024		Three Months Ended March 31, 2023
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	232	$	19
Supplemental disclosure of non-cash investing, and financing activities:
Dividends declared but not yet paid	$	—	$	1,015
Leased assets obtained in exchange for new operating lease liabilities	$	89	$	—

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Immersion Corporation (the “Company”, “Immersion”, “we” or “us”) was incorporated in 1993 in California and reincorporated in Delaware in 1999. We generate license and royalty revenues from a wide range of intellectual property (“IP”) that more fully engage users’ sense of touch when operating digital devices. We focus on the following target application areas: mobile devices, wearables, consumer, mobile entertainment and other content; console gaming; automotive; medical; and commercial.

On June 10, 2024, we acquired a controlling interest in Barnes & Noble Education, Inc., a Delaware corporation (“Barnes & Noble Education”), refer to Note 11. Subsequent Events, for more information. Barnes & Noble Education’s fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April, whereas Immersion has historically reported our financial results based on a calendar year.

Barnes & Noble Education is a contract operator of physical and virtual bookstores for college and university campuses and K-12 institutions across the United States. Barnes & Noble Education is also a textbook wholesaler and inventory management hardware and software providers. Barnes & Noble Education operates physical, virtual, and custom bookstores, delivering essential educational content, tools and general merchandise within a dynamic omnichannel retail environment.

Change in Reporting Period

In order to more closely align with Barnes and Noble Education’s fiscal year end, on September 27, 2024, the Board of Directors of Immersion (the “Board”) approved a change of our fiscal year from the period beginning on January 1 and ending on December 31 to the period beginning on May 1 and ending on April 30. As a result of the change in fiscal year end, we are filing this Transition Report on Form 10-QT for the period from January 1, 2024 through April 30, 2024, referred to herein as the “transition period”. We did not recast the condensed consolidated financial statements for the period from January 1 to April 30, 2023 because the financial reporting processes in place at that time included certain procedures that were completed only on a quarterly basis. Consequently, to recast this period would have been impractical and would not have been cost-justified. As a result, the condensed consolidated financial statements for the quarter ended March 31, 2023 are presented as the most nearly comparable quarter of the earlier year.

Subsequent to this report, our fiscal year will begin on May 1 and end on April 30. Our new fiscal quarters end on July 31, October 31, January 31 and April 30. Therefore, the financial results of certain fiscal quarters may not be comparable to prior fiscal quarters.

Principles of Consolidation and Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of Immersion and our wholly-owned subsidiaries. All intercompany accounts, transactions, and balances have been eliminated in consolidation.

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions for Form 10-Q and the applicable articles of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all information and footnotes necessary for a complete presentation of the financial position, results of operations, and cash flows, in conformity with U.S. GAAP and should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. In the opinion of management, all adjustments consisting of only normal and recurring items necessary for the fair presentation of the financial position and results of operations for the interim periods presented have been included. Certain prior year amounts have been reclassified to conform with the current year presentation.

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Use of Estimates

The preparation of condensed consolidated financial statements and related disclosures requires management to make estimates and assumptions that affect the reported amounts of the condensed consolidated financial statements. Significant estimates include revenue recognition, fair value of financial instruments, valuation of income taxes including uncertain tax provisions, stock-based compensation and long-term deposits for withholding taxes. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. The results of operations for the four months ended April 30, 2024 are not necessarily indicative of the results to be expected for the full year.

Segment Information

We license, and support a wide range of intellectual property (“IP”) that more fully engage users’ sense of touch when operating digital devices. We focus on the following target application areas: mobile devices, wearables, consumer, mobile entertainment and other content; console gaming; automotive; medical; and commercial. We manage these application areas in one operating and reporting segment with only one set of management, development, and administrative personnel.

Our chief operating decision maker (“CODM”) is the Chief Executive Officer. The CODM approves budgets and allocates resources to and assesses the performance of our business on a consolidated basis using information about our revenue and operating loss. We had one segment during the period covered by this Transition Report on Form 10-QT.

Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the Financial Accounting Standard Board (“FASB”) issued ASU No. 2023-09: Income Taxes (Topic 740): Improvements to Income Tax Disclosures that requires entities to disclose additional information about federal, state, and foreign income taxes primarily related to the income tax rate reconciliation and income taxes paid. The new standard also eliminates certain existing disclosure requirements related to uncertain tax positions and unrecognized deferred tax liabilities. The guidance will be effective for the fiscal year beginning after May 1, 2025. The guidance does not affect recognition or measurement in our consolidated financial statements. We are evaluating the impact of this amendment on our consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This guidance will be effective for us for the annual report for the fiscal year ending April 30, 2025 and subsequent interim periods. Early adoption is permitted, and retrospective adoption is required for all prior periods presented. We are currently assessing this guidance and determining the impact on our consolidated financial statements.

2. REVENUE RECOGNITION

Disaggregated Revenue

The following table presents the disaggregation of our revenue for the four months ended April 30, 2024 and three months ended March 31, 2023 (in thousands):

		Four Months Ended April 30, 2024		Three Months Ended March 31, 2023
Fixed fee license revenue	$	39,131	$	1,214
Per-unit royalty revenue		6,651		5,795
Total royalty and license revenue		45,782		7,009
Development, services, and other revenue		—		65
Total revenues	$	45,782	$	7,074

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As a result of accruing per-unit royalty revenue for the reporting period based on estimates, adjustments may be required in the following quarter to true up revenue to the actual amounts reported by our licensees. In the four months ended April 30, 2024, we recorded no adjustments to royalty revenue recognized in the previous reporting period. In the three months ended March 31, 2023, we recorded adjustments of $0.4 million to increase royalty revenue recognized in the previous reporting period.

In February 2024, we entered into a new license agreement to settle a material litigation to protect our IP. We accounted for this agreement in accordance with provisions of Accounting Standard Codification 606, Revenue from Contracts with Customers, (“ASC 606”), and recorded $0.6 million, based on the remaining performance obligations, as Deferred revenue-current on our Condensed Consolidated Balance Sheet as of April 30, 2024. We will recognize this deferred revenue once the remaining performance obligations are met.

Contract Assets

As of April 30, 2024, we had contract assets of $6.6 million included within Prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets. As of December 31, 2023, we had contract assets of $7.7 million included within Prepaid expenses and other current assets, and $0.1 million included within Other assets on the Condensed Consolidated Balance Sheets.

Contract assets decreased by $1.2 million from January 1, 2024 to April 30, 2024, primarily due to actual royalties billed during the four months ended April 30, 2024.

Based on contracts signed and payments received as of April 30, 2024, we expect to recognize $20.5 million in revenue under our fixed fee license agreements, which are satisfied over time, including $17.1 million over one to three years and $3.4 million over more than three years.

Deferred Revenue

The following table presents changes in deferred revenue associated with contract liabilities (in thousands):

		April 30, 2024
Deferred revenue at December 31, 2023	$	12,629
Additions to deferred revenue during the period		9,437
Reductions to deferred revenue for revenue recognized during the period		(1,594	)
Deferred revenue balance at April 30, 2024	$	20,472

As of December 31, 2023, total deferred revenue was $12.6 million. We recognized $1.6 million of deferred revenue during the four months ended April 30, 2024. We recognized $1.2 million of deferred revenue during the three months ended March 31, 2023.

3. INVESTMENTS AND FAIR VALUE MEASUREMENTS

Marketable Securities

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

Investments - current were as follows (in thousands):

		April 30, 2024		December 31, 2023
Marketable equity securities	$	50,496	$	62,978
U.S. treasury securities		42,352		41,313
Investments - current	$	92,848	$	104,291

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Investments- noncurrent were as follows (in thousands):

		April 30, 2024		December 31, 2023
U.S. treasury securities	$	19,747	$	13,653
Corporate bonds		26,798		19,697
Investments - noncurrent	$	46,545	$	33,350

Marketable securities as of April 30, 2024 and December 31, 2023 consisted of the following (in thousands):

		April 30, 2024
		Cost or Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Marketable equity securities
Equity securities	$	50,645	$	5,656	$	(5,805	)	$	50,496
Marketable debt securities
U.S. treasury securities		61,306		825		(32	)		62,099
Corporate bonds		25,695		1,151		(48	)		26,798
Total marketable debt securities		87,001		1,976		(80	)		88,897
	$	137,646	$	7,632	$	(5,885	)	$	139,393

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

The amortized costs and fair value of our marketable debt securities, by contractual maturity, as of April 30, 2024 (in thousands) are as follows:

		April 30, 2024
		Amortized Cost		Fair Value
Less than 1 year	$	41,522	$	42,352
1 to 5 years		45,479		46,545
Total	$	87,001	$	88,897

As of April 30, 2024, the fair value of corporate bonds with unrealized loss position was $5.6 million, with an aggregated loss of less than $0.1 million. As of April 30, 2024, the fair value of treasury securities with unrealized loss position was $25.2 million, with an aggregated loss of less than $0.1 million. As of December 31, 2023, the fair value of available-for-sale debt securities in unrealized loss position for corporate bonds and U.S. treasury securities were $7.1 million and $2.7 million, respectively, with an aggregated loss of $0.2 million. For all available-for-sale debt securities that were in unrealized loss positions, we have determined that it is more likely than not we will hold the securities until maturity or a recovery of the cost basis. We had no credit-related impairment loss as of April 30, 2024 and December 31, 2023.

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Derivative Financial Instruments

Our derivative instruments consisted of call and put options valued at their fair value as of the balance sheet date. These derivative instruments are reported as Other current liabilities on our Condensed Consolidated Balance Sheets as of April 30, 2024 and December 31, 2023 (in thousands):

		April 30, 2024
		Cost		Unrealized Losses			Fair Value
Derivative instruments	$	7,935	$	(2,495	)	$	5,440
	$	7,935	$	(2,495	)	$	5,440

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

A summary of realized and unrealized gains and losses from our equity securities and derivative instruments and realized losses from our marketable debt securities are as follows (in thousands):

		Four Months Ended April 30, 2024			Three Months Ended March 31, 2023
Net unrealized gains (losses) recognized on marketable equity securities	$	(3,899	)	$	2,014
Net realized gains recognized on marketable equity securities		6,778			1,669
Net unrealized gains (losses) recognized on derivative instruments		468			(102	)
Net realized gains recognized on derivative instruments		1,627			717
Net realized gains recognized on marketable debt securities		338			—
Total net gains recognized in interest and other income, net	$	5,312		$	4,298

Fair Value Measurements

Our financial instruments include cash and cash equivalents, receivables, accounts payable and accrued liabilities. The fair value of cash and cash equivalents, receivables, accounts payable and accrued liabilities approximates their carrying values because of the short-term nature of these instruments, which are all considered Level 1.

Our financial instruments measured at fair value on a recurring basis consisted of equity securities, corporate bonds, U.S. treasury securities and derivatives. U.S. treasury securities and equity securities are classified within Level 1 of the fair value hierarchy as they are valued based on quoted market price in an active market. Corporate bonds and derivative instruments are valued based on quoted prices in markets that are less active, broker or dealer quotations, or alternative pricing sources that are observable or can be corroborated by observable market data are generally classified within Level 2 of the fair value hierarchy.

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Financial instruments valued based on unobservable inputs which reflect the reporting entity’s own assumptions or data that market participants would use in valuing an instrument are generally classified within Level 3 of the fair value hierarchy. We did not hold Level 3 financial instruments as of April 30, 2024, and December 31, 2023.

Financial instruments measured at fair value on a recurring basis as of April 30, 2024 and December 31, 2023 are classified based on the valuation technique in the table below (in thousands):

		April 30, 2024
		Fair Value Measurements Using
		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
U.S. treasury securities	$	—	$	62,099	$	—	$	62,099
Equity securities		50,496		—		—		50,496
Corporate bonds		8,220		18,578		—		26,798
Total assets at fair value	$	58,716	$	80,677	$	—	$	139,393

Liabilities
Derivative instruments	$	—	$	5,440	$	—	$	5,440
Total liabilities at fair value	$	—	$	5,440	$	—	$	5,440

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

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

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4. BALANCE SHEETS DETAILS

Cash and Cash Equivalents

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

		April 30, 2024		December 31, 2023
Cash	$	12,497	$	14,840
Money market funds		73,024		41,231
Cash and cash equivalents	$	85,521	$	56,071

Accounts and Other Receivables, net

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

		April 30, 2024		December 31, 2023
Trade accounts receivables, net	$	2,210	$	1,743
Other receivables		928		498
Accounts and other receivables, net	$	3,138	$	2,241

Allowance for credit losses as of April 30, 2024 and December 31, 2023 were not material.

Prepaid Expenses and Other Current Assets

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

		April 30, 2024		December 31, 2023
Prepaid expenses	$	2,308	$	1,916
Contract assets - current		6,631		7,740
Other current assets		162		191
Prepaid expenses and other current assets	$	9,101	$	9,847

Other Current Liabilities

Other current liabilities were as follows (in thousands):

		April 30, 2024		December 31, 2023
Derivative instruments	$	5,440	$	7,930
Income taxes payable		5,835		1,730
Dividends payable		—		1,489
Other current liabilities		2,379		751
Other current liabilities	$	13,654	$	11,900

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5. CONTINGENCIES

From time to time, we receive claims from third parties asserting that our technologies, or those of our licensees, infringe on the other parties’ IP rights. Management believes that these claims are without merit. Additionally, periodically, we are involved in routine legal matters and contractual disputes incidental to our normal operations. In management’s opinion, unless we disclosed otherwise, the resolution of such matters will not have a material adverse effect on our consolidated financial condition, results of operations, or liquidity.

In the normal course of business, we provide indemnification of varying scope to customers, most commonly to licensees in connection with licensing arrangements that include our IP, although these provisions can cover additional matters. Historically, costs related to these guarantees have not been significant, and we are unable to estimate the maximum potential impact of these guarantees on our future results of operations.

LGE Korean Withholding Tax Matter

On October 16, 2017, we received a letter from LG Electronics Inc. (“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, a subsidiary of the Company, from 2012 to 2014. Pursuant to an agreement reached with LGE, on April 8, 2020, we provided a provisional deposit to LGE in the amount of KRW 5,916,845,454 (approximately $5.0 million) representing the amount of such withholding tax that was imposed on LGE, which provisional deposit would be returned to us to the extent we ultimately prevail in the appeal in the Korean courts. In the second quarter of 2020, we recorded this deposit in Long-term deposits on our Condensed Consolidated Balance Sheets. In the fourth quarter of 2021, we recorded an impairment charge of $0.8 million related to the long-term deposits paid to LGE.

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 related to the 2012 to 2017 period. The Korea Tax Tribunal hearing took place on March 5, 2019. 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. We have had numerous hearings before the Korea Administrative Court in the years 2019 through 2022. We had a hearing on April 27, 2023, and the Korea Administrative Court rendered a decision on this matter on June 8, 2023, in which it ruled that the withholding taxes and penalties which were imposed by the Korean tax authorities on LGE should be cancelled with litigation costs to be borne by the Korean tax authorities. In connection with the Korea Administrative Court’s decision, the Korean tax authorities filed an appeal on June 28, 2023, with the Seoul High Court to seek the cancellation of the lower court’s decision. The appellate case is in progress at the Seoul High Court and the first and the second hearings took place on November 30, 2023 and February 1, 2024, respectively. However, the next hearing will be set at a later date.

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On April 25, 2023, we received notice from LGE requesting us to reimburse LGE with respect to withholding tax imposed on LGE by the Korean tax authorities following a recent tax audit of LGE for the years 2018 through 2022. Pursuant to an agreement reached with LGE, on June 2, 2023, we provided a provisional deposit to LGE in the amount of KRW 3,024,877,044 (approximately $2.3 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 Korean courts. In the second quarter of 2023, we recorded this deposit in Long-term deposits on our Condensed Consolidated Balance Sheets. On June 29, 2023, on behalf of LGE, we filed an appeal with the Korea Tax Tribunal regarding their findings with respect to the withholding taxes related to the 2018 to 2022 period. On August 7, 2023, the Korean tax authority submitted its answer against the tax appeal. On September 8, 2023, on behalf of LGE, the Company submitted its rebuttal brief in response thereto. On September 25, 2023, Korean tax authority submitted an additional response brief, and on November 23, 2023, the Korea Tax Tribunal rendered a decision against LGE, dismissing the claims of the Company on the grounds that its claims are without merit. In response thereto, on behalf of LGE, we filed an appeal with the Korea Administrative Court on December 29, 2023. On July 23, 2024, the Korea Tax Tribunal rendered a decision against LGE, and deadline for the court appeal of the local income claim is October 21, 2024. In addition, the Korea Administrative Court scheduled a hearing date of August 29, 2024, which was cancelled and will be rescheduled at a later date. On October 18, 2024, the Company filed a complaint and a brief with the Korea Administrative Court for the local income tax appeal. As of April 30, 2024, we have accrued $0.3 million of withholding taxes, interest and penalties related to the 2018 to 2022 period for which the Korean tax authorities have recently assessed LGE. These withholding taxes have been reclassified and reported as an impairment reduction to the Long-term deposit made in the third quarter of 2023 in order to present the deposit at its estimated recoverable value.

Based on the developments in these cases, we regularly reassess the likelihood that we will prevail in the claims from the Korean tax authorities with respect to the LGE case. To the extent that we determine that it is more likely than not that we will prevail against the claims from the Korean tax authorities, then no additional tax expense is provided for in our Condensed Consolidated Statements of Income and Comprehensive Income. In the event that we determine that it is more likely than not that we will not prevail against the claims from the Korean tax authorities, or a portion thereof, then we would estimate the anticipated additional tax expense associated with that outcome and record it as additional income tax expense in our Condensed Consolidated Statements of Income and Comprehensive Income in the period of the new determination. If the additional income tax expense was related to the periods assessed by Korean tax authorities and for which we recorded a Long-term deposits on our Condensed Consolidated Balance Sheets, then the additional income tax expense would be recorded as an impairment to the Long-term deposits. If the additional income tax expense was not related to the periods assessed by Korean tax authorities and for which we recorded in Long-term deposits on our Condensed Consolidated Balance Sheets, then the additional income tax expense would be accrued as an Other current liabilities.

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

Immersion Corporation vs. Meta Platforms, Inc., f/k/a Facebook, Inc. (“Meta”)

On May 26, 2022, we filed a complaint against Meta in the United States District Court for the Western District of Texas. The complaint alleges that Meta’s augmented and virtual reality (“AR/VR”) systems, including the Meta Quest 2, infringe six of our patents that cover various uses of haptic effects in connection with such AR/VR systems. We are seeking to enjoin Meta from further infringement and to recover a reasonable royalty for such infringement.

On February 9, 2024, we entered into a Patent License and Settlement Agreement (the “License and Settlement Agreement”) with Meta, pursuant to which the parties have agreed to terms for resolving the litigation matters described above (the “Litigation”) and Meta will license, on a non-exclusive basis, our patent portfolio for use in its products. Under the License and Settlement Agreement, in consideration for the license and releases granted therein, we received approximately $17.3 million, after deducting for legal fees related to the Litigation (and other pending litigation) and other liabilities. Pursuant to the License and Settlement Agreement, we and Meta agreed to terms for dismissal by them of the outstanding Litigation and the inter partes reviews (“IPRs”). On February 16, 2024, the parties dismissed the district court actions and requested permission from the Patent Trial and Appeal Board to dismiss the IPRs. The Patent Trial and Appear Board dismissed the IPRs on February 27, 2024. The description of the License and Settlement Agreement contained herein does not purport to be complete and is qualified in its entirety by reference to the License and Settlement Agreement, which is incorporated herein by reference as Exhibit 10.1 to this Transition Report on Form 10-QT.

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Immersion Corporation vs. Xiaomi Group

On or about March 3, 2023, the Company initiated patent infringement lawsuits against several companies of the Xiaomi-Group in Germany, France and India (the “Xiaomi Litigation”). Immersion filed complaints against Xiaomi-Group companies and their agents in the Düsseldorf Regional Court in Germany, the Tribunal judiciaire de Paris (Paris First Instance Civil Court) in France, and the High Court of Delhi, at New Delhi, in India. The complaints alleged that the Xiaomi-Group’s devices, including the Xiaomi 12, infringed Immersion's patents that cover various uses of haptic effects in connection with such devices.

On June 12, 2024, the Company entered into a Patent License Agreement (the “Xiaomi License Agreement”) with the Xiaomi Group, pursuant to which the parties have agreed to terms for resolving the Xiaomi Litigation and the Xiaomi Group will license, on a non-exclusive basis, the Company’s patent portfolio for use in its products. The Xiamoi Litigation was dismissed in October 2024.

Immersion Corporation vs. Valve Corporation (“Valve”)

On May 15, 2023, the Company filed a complaint against Valve in the United States District Court for the Western District of Washington. The complaint alleges that Valve’s AR/VR systems, including the Valve Index, and handheld Steam Deck, infringe seven of our patents that cover various uses of haptic effects in connection with such AR/VR systems and other video game systems. The Company is seeking to enjoin Valve from further infringement and to recover a reasonable royalty for such infringement.

The complaint against Valve asserts infringement of the following patents:

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

Valve responded to the complaint on July 24, 2023, with a motion to dismiss. Valve re-noted its motion, which changed Immersion’s response deadline from August 14, 2023 to August 21, 2023. Immersion timely filed its response, and Valve filed its reply on August 25, 2023. The Court heard arguments on Valve’s motion on February 8, 2024. The Court entered a case schedule on November 21, 2023. The case schedule did not include a trial date but set the pretrial conference for May 30, 2025.

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Valve filed IPRs, IPR2024-00477 and IPR2024-00478 on January 19, 2024. These petitions are directed to U.S. Patent Nos. 7,336,260 and 9,430,042 respectively. The Company filed its patent owner preliminary responses to these petitions on April 26, 2024, and April 29, 2024, respectively. The Patent Trial and Appeal Board issued a decision, granting institution of these petitions on July 24, 2024, and July 25, 2024, respectively. The Company’s patent owner responses to these petitions were filed on October 15, 2024, and October 17, 2024, respectively. Valve filed IPR2024-00508 on January 30, 2024, which is directed to U.S. Patent No. 9,116,546. The Company elected not to file a patent owner preliminary response to this petition. The Patent Trial and Appeal Board issued a decision, granting institution of this petition on August 6, 2024. The Company elected not to file patent owner response to the petition. Valve filed IPR2024-00556 on February 7, 2024, which is directed to U.S. Patent No. 8,749,507. The Company filed its patent owner preliminary response to this petition on May 15, 2024. The Patent Trial and Appeal Board issued a decision, granting institution on August 6, 2024. The Company elected not to file a patent owner response to the petition . Valve filed IPR2024-00557 on February 7, 2024, which is directed to U.S. Patent No. 10,665,067. The Company filed its patent owner preliminary response to this petition on May 15, 2024. The Patent Trial and Appeal Board issued a decision, granting institution on August 13, 2024. The Company’s patent owner response to the petition was filed November 5, 2024. Valve filed IPR2024-00582 on February 16, 2024, which is directed to U.S. Patent No. 11,175,738. The Company filed its patent owner preliminary response to this petition on June 27, 2024. The Patent Trial and Appeal Board issued a decision on granting institution on September 25, 2024. The Company’s patent owner response to the petition is due December 16, 2024. Valve filed IPR2024-00714 on March 22, 2024, which is directed to U.S. Patent No. 10,627,907. The Company filed its preliminary patent owner preliminary response to this petition on July 30, 2024. The Patent Trial and Appeal Board issued a decision, granting institution on August 28, 2024. The Company’s patent owner response to the petition is due January 21, 2025.

The parties submitted their joint claim construction statement and respective positions on March 29, 2024.

On March 14, 2024, Valve filed a motion to stay the district court case pending the PTAB’s decisions on the IPRs. Immersion opposed the motion on March 25, 2024, and Valve filed its reply brief on March 29, 2024. The Court granted Valve’s motion to stay on April 4, 2024. In connection with that order, the Court struck Valve’s motion to dismiss with leave to refile at a later date.

6. STOCK-BASED COMPENSATION

Stock Options and Awards

Our equity incentive program is a long-term retention program that is intended to attract, retain, and provide incentives for employees, consultants, officers, and directors and to align stockholder and employee interests. We may grant time-based options, market condition-based options, stock appreciation rights, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance shares, market condition-based performance restricted stock units (“PSUs”), and other stock-based equity awards to employees, officers, directors, and consultants.

On January 18, 2022, our stockholders approved the 2021 Equity Incentive Plan (as amended, the “2021 Plan”), which provides for a total number of shares reserved and available for grant and issuance equal to 3,525,119 shares plus up to an additional 855,351 shares that are subject to stock options or other awards previously granted under the 2011 Equity Incentive Plan. On March 30, 2023, our stockholders approved an amendment to the 2021 Plan which increased the total number of shares reserved and available for grant and issuance equal to 8,146,607 shares plus up to an additional 855,351 shares that are subject to stock options or other awards previously granted under the 2011 Equity Incentive Plan.

Under our equity incentive plans, stock options may be granted at prices not less than the fair market value on the date of grant for such stock options. Stock options generally vest over four years and expire seven years from the applicable grant date. Market condition-based stock awards are subject to a market condition whereby the closing price of our common stock must exceed a certain level for a number of trading days within a specified time frame or the awards will be canceled before expiration. RSAs generally vests over one year. RSUs generally vest over three years. Awards granted other than a stock option or a stock appreciation right shall reduce the common stock shares available for grant by 1.75 shares for every share issued.

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A summary of our equity incentive program as of April 30, 2024 is as follows (in thousands):

Common stock shares available for grant	3,662
RSUs outstanding	1,129
RSAs outstanding	86
PSUs outstanding	400

As of April 30, 2024, we did not have any outstanding stock options.

Restricted Stock Units

The following summarizes RSU activities for the four months ended April 30, 2024:

	Number of Restricted Stock Units (in thousands)			Weighted Average Grant Date Fair Value Per Share	Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2023	1,128		$	6.57	1.05	$	7,964
Granted	256			6.83
Released	(255	)		6.04
Forfeited	—			—
Outstanding at April 30, 2024	1,129		$	6.53	1.09	$	8,207

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

Restricted Stock Awards

The following summarizes RSA activities for the four months ended April 30, 2024:

	Number of Restricted Stock Awards (in thousands)			Weighted Average Grant Date Fair Value Per Share	Weighted Average Remaining Recognition Period (Years)
Outstanding at December 31, 2023	75		$	8.31	0.24
Granted	86			7.25
Released	(75	)		8.31
Forfeited	—			—
Outstanding at April 30, 2024	86		$	7.25	1.00

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Market Condition-Based Performance Stock Units

The following summarizes PSU activities for the four months ended April 30, 2024:

	Number of Market Condition-Based Performance Stock Units (in thousands)		Weighted Average Grant Date Fair Value Per Share	Weighted Average Remaining Recognition Period (Years)
Outstanding at December 31, 2023	400	$	3.63	0.63
Granted	—		—
Released	—		—
Forfeited	—		—
Outstanding at April 30, 2024	400	$	3.63	0.42

Stock-based Compensation Expense

Valuation and amortization methods

Stock-based compensation is based on the estimated fair value of awards, net of estimated forfeitures, and recognized over the requisite service period. Estimated forfeitures are based on historical experience at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The stock-based compensation related to all of our stock-based awards for the four months ended April 30, 2024, and three months ended March 31, 2023 is as follows (in thousands):

		Four Months Ended April 30, 2024			Three Months Ended March 31, 2023
Stock options	$	(2	)	$	(56	)
RSUs, RSAs and PSUs		1,602			1,002
Total	$	1,600		$	946

Sales and marketing	$	244		$	(99	)
Research and development		3			(74	)
General and administrative		1,353			1,119
Total	$	1,600		$	946

As of April 30, 2024, there was $4.9 million of unrecognized compensation cost adjusted for estimated forfeitures related to non-vested stock options, RSUs, RSAs and PSUs granted to our employees and directors. This unrecognized compensation cost will be recognized over an estimated weighted-average period of approximately 1.66 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.

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7. STOCKHOLDERS’ EQUITY

Stock Repurchase Program

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 the Board on February 23, 2022. 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, as amended. 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. The December 2022 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. The December 2022 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. On August 8, 2023, the Board approved an amendment to extend the expiration date of the December 2022 Stock Repurchase Program that was set to expire on December 29, 2023 to December 29, 2024.

During 2023, we repurchased 1,217,774 shares of our common stock for $8.3 million at average purchase price of $6.77 per share. We did not repurchase any stock during the four months ended April 30, 2024. As of April 30, 2024, we had $41.7 million available for repurchase under the December 2022 Stock Repurchase Program.

Dividends Declared and Dividend Payments

On February 21, 2023, the Board declared a quarterly dividend, in the amount of $0.03 per share, which was paid on April 28, 2023 to stockholders of record on April 13, 2023.

On November 13, 2023, our Board declared a quarterly dividend in the amount of $0.045 per share, which was paid on January 25, 2024 to shareholders of record on January 14, 2024.

On February 28, 2024, our Board declared a quarterly dividend in the amount of $0.045 per share, which was paid on April 19, 2024 to shareholders of record on April 12, 2024.

Future dividends will be subject to further review and approval by the Board in accordance with applicable law. The Board reserves the right to adjust or withdraw the quarterly dividend in future periods as it reviews our capital allocation strategy from time-to-time.

In the four months ended April 30, 2024 and the three months ended March 31, 2023, the total dividends paid was $3.0 million and $4.4 million, respectively.

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8. INCOME TAXES

Provision for income taxes the four months ended April 30, 2024 and the three months ended March 31, 2023 consisted of the following (in thousands):

		Four Months Ended April 30, 2024			Three Months Ended March 31, 2023
Income before provision for income taxes	$	24,576		$	9,785
Provision for income taxes		6,799			1,507
Effective tax rate		27.7	%		15.4	%

Provision for income taxes for the four months ended April 30, 2024 and the three months ended March 31, 2023 resulted primarily from estimated domestic and foreign taxes included in the calculation of the effective tax rate.

We provided no valuation allowance for federal deferred tax assets, whose future realization is more likely than not and continue to maintain full valuation allowance for certain state deferred tax assets in the United States as well as federal tax assets in Canada. Changes in provision for income taxes resulted primarily from the change in income from continuing operations across various tax jurisdictions.

In the event that we determine the deferred tax assets are realizable based on an assessment of relevant factors, an adjustment to the valuation allowance may increase income in the period such determination is made. The valuation allowance does not impact our ability to utilize the underlying net operating loss carryforwards. We also maintain liabilities for uncertain tax positions.

As of April 30, 2024, we had unrecognized tax benefits of approximately $7.6 million of which $7.1 million could be payable in cash. In addition, interest and penalty of $0.2 million could also be payable in cash in relation to unrecognized tax benefits. The total amount of unrecognized tax benefits that would affect our effective tax rate, if recognized, is $7.1 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.

As of April 30, 2024, we had net deferred income tax assets of $2.8 million. Because we have net operating loss and credit carryforwards, there are open statutes of limitations in which federal, state, and foreign taxing authorities may examine our tax returns for all years from 2008 through the current period.

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9. NET INCOME PER SHARE

Basic net income per share is computed using the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed using the weighted average number of shares of common stock, adjusted for any dilutive effect of potential common stock. Potential common stock, computed using the treasury stock method, includes stock options and stock awards.

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

	Four Months Ended April 30, 2024	Three Months Ended March 31, 2023
Denominator:
Weighted-average shares outstanding, basic	31,729	32,603
Shares related to outstanding options, unvested RSUs, RSAs, and PSUs	379	482
Weighted average shares outstanding, diluted	32,108	33,085

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

For the four months ended April 30, 2024, we had 1,440 outstanding RSUs, PSUs and RSAs outstanding that could potentially dilute basic earnings per share in the future, but these were excluded from the computation of diluted net income per share because their effect would have been anti-dilutive. For the three months ended March 31, 2023, we had 140,000 outstanding stock options and 2,000 outstanding awards that could potentially dilute basic earnings per share in the future, but these were excluded from the computation of diluted net income per share because their effect would have been anti-dilutive.

10. LEASES

We lease office space, which is accounted for as an operating lease in accordance with the provisions of ASC Topic 842, with expiration dates on or before March 31, 2026. Immersion recognizes lease expense on a straight-line basis over the lease term. Leases with an initial term of twelve months or less are not recorded on the condensed consolidated balance sheets. Immersion combines lease and non-lease components for new and reassessed leases, and applies discount rates to operating leases under a portfolio approach.

	April 30, 2024		March 31, 2023
Weighted average remaining lease terms (in years)	1.92		0.69
Weighted average discount rate	4.7	%	N/A

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11. SUBSEQUENT EVENTS

Business Combination

On June 10, 2024 (“Closing Date”), the Transactions (defined below) were consummated pursuant to the terms of the Purchase Agreement among Barnes & Noble Education and the Purchasers (as defined in the Purchase agreement), following Barnes & Noble Education’s receipt of the requisite approval of its stockholders at a special meeting of its stockholders held on June 5, 2024. The following is presented on a post-reverse stock split basis, which is defined as a reverse stock split of Barnes & Noble Education’s outstanding shares of Common Stock at a ratio of 1-for-100, effective as of June 11, 2024.

Pursuant to the terms of the Purchase Agreement, Barnes & Noble Education conducted a rights offering (the “Rights Offering”), whereby Barnes & Noble Education distributed at no charge to the holders of its common stock (“BNED Common Stock”) non-transferable subscription rights (“Rights”) to purchase up to an aggregate of 9,000,000 new shares of BNED Common Stock (the “Offered Shares”) at a subscription price of $5.00 per share (the “Subscription Price”). On the Closing Date, Barnes & Noble Education issued the Offered Shares, which generated $45,000,000 in gross proceeds, including $10,033,507 of Offered Shares purchased by Toro 18 Holdings, LLC (“Investor”) pursuant to the Backstop Commitment (as defined in the Purchase Agreement). Pursuant to the Backstop Commitment, Immersion through Investor, purchased 2,006,701 shares of BNED Common Stock. Barnes & Noble Education reimbursed Immersion, through Investor, for reasonable legal and other expenses in connection with the Transactions in the amount of $2,450,000. Barnes & Noble Education also paid an amount equal to $2,450,000 to Immersion, through Investor, as payment in consideration for its Backstop Commitment.

In addition to the Rights Offering, Immersion, through Investor, purchased from Barnes & Noble Education an aggregate of 9,000,000 new shares of BNED Common Stock at the Subscription Price for a purchase price of $45,000,000 (the “PIPE Transaction”, and together with the Rights Offering, the “Transactions”).

As a result of the Transactions, Barnes & Noble Education received a total of $95 million in gross proceeds, of which $80.7 million was used to reduce its outstanding debt.

In connection with the closing, Barnes & Noble Education appointed Eric Singer, William C. Martin, Emily S. Hoffman, and Elias Nader to serve as members of the board of directors of BNED (the “BNED Board”) following the Closing. Messrs. Singer, Martin and Nader and Ms. Hoffman are current members of the Company’s board of directors. In addition, at the closing, Sean Madnani was appointed to the BNED Board along with two existing directors, Kathryn Eberle Walker and Denise Warren who will each continue to serve on the Barnes & Noble Education's Board following the Closing.

As part of the Transactions, the Company acquired 42% of all outstanding common shares of Barnes & Noble Education, as well as control over Barnes & Noble Education through the five Immersion-appointed board seats. The total consideration transferred was approximately $50.1 million, consisting of $52.2 million in cash consideration paid to Barnes & Noble Education less $2.1 million in transaction costs incurred by Immersion but reimbursed by Barnes & Noble Education. The acquisition aims to expand Immersion's offerings, increase its customer reach, and diversify into the education sector.

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The acquisition was accounted for as a business combination and the total purchase price was allocated to the net tangible and intangible assets and liabilities based on their fair values on the acquisition date with the excess recorded as goodwill. The Company expects to continue to obtain information to assist in determining the fair value of the net assets acquired as of the Closing Date while the measurement period remains open, which will not exceed one year from the acquisition date. Measurement period adjustments related to the acquisition will be applied retrospectively to the Closing Date.

The fair value of the noncontrolling interest of $203.7 million on the Closing Date was calculated using the acquisition-date fair value of $13.40 per share multiplied by the number of noncontrolling interest shares.

The following table presents the preliminary purchase price allocation for the acquisition (in thousands):

Preliminary Amount Recognized as of the Acquisition Date
Assets acquired
Cash and cash equivalents	$	14,736
Accounts receivable		113,743
Merchandise inventories		336,741
Textbook rental inventories		9,835
Prepaid expenses and other current assets (including $4.8 million in restricted cash)		26,969
Property and equipment		118,818
Operating lease right-of-use assets		155,664
Intangible assets		95,000
Other assets noncurrent (including $1.0 million in restricted cash)		11,634
Total assets acquired	$	883,140
Liabilities assumed
Accounts payable	$	279,456
Accrued liabilities		51,123
Deferred revenue - current		7,651
Operating lease liabilities - current		80,263
Deferred tax liabilities - noncurrent		636
Operating lease liabilities - noncurrent		107,400
Deferred revenue - noncurrent		3,393
Other long-term liabilities		12,413
Long-term borrowings		101,235
Total liabilities assumed	$	643,570
Net assets acquired		239,570

Total consideration transferred	$	50,133
Less: Net assets acquired		(239,570	)
Plus: Noncontrolling interest		203,657
Goodwill		14,220

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Identifiable intangible assets acquired were comprised of the following (in thousands except for estimated useful life):

		Amount	Estimated Life
Trade name	$	45,000	Indefinite
Customer relationships		50,000	13 years
Total intangible assets	$	95,000

Trade name represent Barnes & Noble Education’s right to its trade name on a perpetual, royalty-free basis as it existed on the acquisition closing date. Customer relationships consist of distinct value associated with Barnes & Noble Education's large operating footprint with direct access to students and faculty across a diverse customer base.

The Company used the assistance of a third-party firm to estimate the fair value of the intangible assets acquired. The Company used an income approach to estimate the fair values of the trade names and customer relationships. The fair values assigned to identifiable intangible assets were determined through the use of the income approach, specifically the relief from royalty and the multi-period excess earnings methods. The major assumptions used to estimate the values of identifiable intangible assets include management’s estimates of future revenue, adjusted for growth and attrition based on historical data and management's forward-looking expectations.

These cash flows were discounted at a rate of 21%, which reflects the Company’s cost of equity. The useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows.

Goodwill generated from this acquisition is primarily attributed to the value of Barnes & Noble Education's assembled workforce. Goodwill is not amortized and is tested for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company’s entire goodwill balance is associated with the Barnes & Noble Education reporting unit. Goodwill is not deductible for tax purposes.

The Company acquired a deferred tax asset of $0.7 million, recorded and a deferred tax liability of $1.3 million, recorded under Deferred tax liabilities, net – noncurrent, as part of this business combination, as shown in the accompanying consolidated balance sheet.

The Company also engaged a third-party valuation firm to estimate the fair value of the property and equipment and inventory acquired. The fair value as of the Closing Date reflects a step-up in basis due to the highly depreciable nature of the property and equipment. No material fair value adjustments for inventory were identified, as there are minimal costs associated with procurement.

Most of the net tangible assets were valued at their respective carrying amounts as of the acquisition date, as the Company believes that these amounts approximate their current fair values. The leases acquired were recorded at their respective fair values as of the acquisition date.

The acquired entity’s results of operations were included in the Company's condensed consolidated financial statements from the date of acquisition, June 10, 2024, as adjusted for specific fair value adjustments discussed above.

Dividends Declared

On May 8, 2024, our Board declared a quarterly dividend in the amount of $0.045 per share, which was paid on July 26, 2024 to stockholders of record on July 8, 2024.

On August 12, 2024, our Board declared a quarterly dividend in the amount of $0.045 per share, which was paid on October 18, 2024 to stockholders of record on October 4, 2024.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements involve risks and uncertainties. Forward-looking statements are frequently identified by words such as “anticipates”, “believes”, “expects”, “intends”, “may”, “can”, “will”, “places”, “estimates”, and other similar expressions. However, these words are not the only way we identify forward-looking statements. Examples of forward-looking statements include among other things, any expectations, projections, or other characterizations of future events, or circumstances, and include statements regarding: our strategy and our ability to execute our business plan; our competition and the market in which we operate; our customers and suppliers; our revenue and trends related thereto, and the recognition and components thereof; our costs and expenses, including capital expenditures; our investment of surplus funds and sales of marketable securities seasonality and demand; our investment in research and technology development; changes to general and administrative expenses; our foreign operations and the reinvestment of our earnings related thereto; our investment in and protection of our IP; our employees; capital expenditures and the sufficiency of our capital resources; unrecognized tax benefit and tax liabilities; the impact of changes in interest rates and foreign exchange rates, as well as our plans with respect to foreign currency hedging in general; changes in laws and regulations, including with respect to taxes; our plans and estimates related to and the impact of current and future litigation and arbitration and our dividend, stock repurchase and equity distribution programs.

Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Actual results could differ materially from those projected in the forward-looking statements, therefore we caution you not to place undue reliance on these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the risk factors contained under Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission the (“SEC”) on March 11, 2024 and Part I, Item 1A, “Risk Factors” in Barnes & Noble Education, Inc.’s Annual Report on Form 10-K for the fiscal year ended April 27, 2024 filed with the SEC on July 1, 2024 and in Part II, Item 1A, “Risk Factors” in this Transition Report on Form 10-QT.

Any forward-looking statements made by us in this report speak only as of the date of this report, and we do not intend to update these forward-looking statements after the filing of this report, unless required to do so by applicable law or regulation. You are urged to review carefully and consider our various disclosures in this report and in our other reports publicly disclosed or filed with the SEC that attempt to advise you of the risks and factors that may affect our business.

OVERVIEW

Immersion Corporation (“Immersion”) was incorporated in 1993 in California and reincorporated in Delaware in 1999. In this Management’s Discussion and Analysis of Financial Condition and Results of Operations the terms the “Company,” “us,” “we,” or “our” refer to Immersion and its consolidated subsidiaries. Immersion generates license and royalty revenues from a wide range of intellectual property (“IP”) that more fully engage users’ sense of touch when operating digital devices. We focus on the following target application areas: mobile devices, wearables, consumer, mobile entertainment and other content; console gaming; automotive; medical; and commercial.

On June 10, 2024, we acquired a controlling interest in Barnes & Noble Education, Inc., a Delaware corporation (“Barnes & Noble Education”), refer to Note 11. Subsequent Events, for more information. Barnes & Noble Education's fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April, whereas Immersion has historically reported our financial results based on a calendar year.

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Change in Reporting Period

In order to more closely align the year ends, on September 27, 2024, the Board of Directors of Immersion (the “Board”) approved a change of our fiscal year from the period beginning on January 1 and ending on December 31 to the period beginning on May 1 and ending on April 30. As a result of the change in fiscal year end, we are filing this Transition Report on Form 10-QT for the period from January 1, 2024 through April 30, 2024, referred to herein as the “transition period”. We did not recast the consolidated financial statements for the period from January 1 to April 30, 2023 because the financial reporting processes in place at that time included certain procedures that were completed only on a quarterly basis. Consequently, to recast this period would have been impractical and would not have been cost-justified. As a result, the financial statements for the quarter ended March 31, 2023 are presented as the most nearly comparable quarter of the prior fiscal year.

Subsequent to this report, our fiscal year will begin on May 1 and end on April 30. Our new fiscal quarters end on July 31, October 31, January 31and April 30. Therefore, the financial results of certain fiscal quarters may not be comparable to prior fiscal quarters.

For this this Transition Report on Form 10-QT, we are reporting the four months ended April 30, 2024 as compared to the 3 months ended March 31, 2023.

Results of Operations

Overview

The following table sets forth our Condensed Consolidated Statements of Income and Comprehensive Income for the four months ended April 30, 2024 and the three months ended March 31, 2023:

		Four Months Ended April 30, 2024			Three Months Ended March 31, 2023
Revenues:
Royalty and license revenue	$	45,782		$	7,009
Development, services, and other		—			65
Total revenues		45,782			7,074
Operating expenses:
Sales and marketing		1,713			96
Research and development		46			130
General and administrative		27,990			3,589
Total operating expenses		29,749			3,815
Operating income		16,033			3,259
Interest and other income, net		8,543			6,526
Income before provision for income taxes		24,576			9,785
Provision for income taxes		(6,799	)		(1,507	)
Net income	$	17,777		$	8,278

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Revenues

Our revenue is primarily derived from fixed fee license agreements and per-unit royalty agreements. Royalty and license revenue is composed of per unit royalties earned based on usage or net sales by licensees and fixed payment license fees charged for our IP and software.

Four Months Ended April 30, 2024 Compared to Three Months Ended March 31, 2023

A revenue summary for the four months ended April 30, 2024 and three months ended March 31, 2023 is as follows (in thousands, except for percentages):

		Four Months Ended April 30, 2024		Three Months Ended March 31, 2023		$ Change		% Change
Revenues:
Fixed fee license revenue	$	39,131	$	1,214	$	37,917		3123	%
Per-unit royalty revenue		6,651		5,795		856		15	%
Total royalty and license revenue		45,782		7,009		38,773		553	%
Development, services, and other revenue		—		65		(65	)	(100	)%
Total revenues	$	45,782	$	7,074	$	38,708		547	%

Royalty and license revenue

Fixed fee license revenue increased by $37.9 million in the four months ended April 30, 2024 compared to the three months ended March 31, 2023 primarily due to a $37.7 million increase in gaming license revenue and a $0.2 million increase in mobility license revenue resulting from new license agreements we entered into in the first three months of 2024.

Per-unit royalty revenue increased by $0.9 million, or 15%, in the four months ended April 30, 2024 compared to the three months ended March 31, 2023, primarily due to a $1.2 million increase in royalties from gaming licensees, a $0.9 million increase in royalties from other licensees and a 0.2 million increase in royalties from automotive licensees partially offset by $1.6 million decrease in revenues from mobility licensees.

We recognized $0.4 million license revenue and $1.5 million royalty revenue in the month ended April 30, 2024.

Geographically, revenues generated in North America, Asia and Europe for the four months ended April 30, 2024 represented 84%, 15%, and 1%, respectively, of our total revenue as compared to 12%, 84%, and 4%, respectively, for the three months ended March 31, 2023.

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Operating Expenses

A summary of operating expenses for the four months ended April 30, 2024, and the three months ended March 31, 2023 is as follows (in thousands, except for percentages):

		Four Months Ended April 30, 2024	Three Months Ended March 31, 2023		$ Change		% Change
Sales and marketing	$	1,713	96	$	1,617		1684	%
Research and development		46	130		(84	)	(65	)%
General and administrative		27,990	3,589		24,401		680	%

Sales and Marketing - Our sales and marketing expenses primarily consisted of employee compensation and benefits, including stock-based compensation, marketing costs and allocated facilities costs.

Sales and marketing expenses increased $1.6 million in the four months ended April 30, 2024 compared to the three months ended March 31, 2023 primarily attributable to an increase in compensation, benefits and other personnel-related costs due to higher variable compensation and stock-based compensation. For the month of April 2024, sales and marketing expenses was $0.4 million.

Research and Development - Our research and development expenses primarily consisted of employee compensation and benefits, including stock-based compensation and office expense.

Research and development expenses decreased $0.1 million, or 65%, in the four months ended April 30, 2024, compared to the three months ended March 31, 2023. This decrease was primarily attributable to lower severance costs. For the month in 2024, research and development expense was not material.

General and Administrative - Our general and administrative expenses primarily consisted of employee compensation and benefits including stock-based compensation; legal and other professional fees; external legal costs for patents; office expense; travel; and allocated facilities costs.

General and administrative expenses increased $24.4 million in the four months ended April 30, 2024 as compared to the three months ended March 31, 2023 primarily due to a $21.5 million increase in legal costs and a $2.8 million increase in compensation, benefits and other personnel related costs and settlement of material litigation to protect our IP. The increase in legal costs in the four months ended April 30, 2024 compared to the three months ended March 31, 2023 due to an increase from legal costs related to the new license agreements. The increase in compensation, benefits and other personnel related costs in the four months ended April 30, 2024 compared to the three months ended March 31, 2023 were largely driven by increases in variable compensation. In addition, we are engaged in, and may be required to engage in further, litigation to protect our IP, which may cause our general and administrative expenses to substantially increase reflecting such litigation costs.

General and administrative expenses was $2.1 million for the month ended April 30, 2024.

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Interest and Other Income, net

Interest and Other Income (loss) - Interest and other income consists primarily of interest and dividend income from cash and cash equivalents and 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.


		Four Months Ended April 30, 2024			Three Months Ended March 31, 2023		$ Change		% Change
Interest and other investment income, net	$	8,841		$	6,415	$	2,426		38	%
Other income (expense), net		(297	)		111		(408	)	(368	)
Interest and other income, net	$	8,544		$	6,526	$	2,018		31

Interest and other investment income increased $2.4 million during the four months ended April 30, 2024 compared to the three months ended March 31, 2023, primarily driven by a $1.8 million increase in net gains from investments in marketable equity securities, marketable debt securities and derivative instruments and a $0.7 million increase in interest income.

Other income (expense), net decreased $0.4 million during the four months ended April 30, 2024 compared to the three months ended March 31, 2023, primarily driven by an increase in net foreign currency transaction losses.

For the month ended April 30,2024, interest and other income, net was $0.4 million.

Income Taxes

A summary of provision for income taxes and effective tax rates for the four months ended April 30, 2024 and the three months ended March 31, 2023 is as follows (in thousands):

		Four Months Ended April 30, 2024			Three Months Ended March 31, 2023		$ Change	% Change
Income before provision for income taxes	$	24,576		$	9,785
Provision for income taxes		6,799			1,507		5,292	351	%
Effective tax rate		27.7	%		15.4	%

We provided no valuation allowance for federal assets, whose future realization is 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 year-over-year change in provision for income taxes resulted primarily from the change in income from continuing operations across various tax jurisdictions.

We 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. In the event that we determine the deferred tax assets are realizable based on an assessment of relevant factors, an adjustment to the valuation allowance may increase income in the period such determination is made. The valuation allowance does not impact our ability to utilize the underlying net operating loss carryforwards.

We also maintain liabilities for uncertain tax positions. As of April 30, 2024, we had unrecognized tax benefits under ASC 740 Income Taxes of approximately $7.6 million, of which $7.1 million could be payable in cash. In addition, interest and penalty $0.2 million could also be payable in cash in relation to the unrecognized tax benefits. The total amount of unrecognized tax benefits that would affect our effective tax rate, if recognized, is $7.1 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.

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Liquidity and Capital Resources

Our cash equivalents, investments - current and investments - noncurrent consist primarily of money-market funds, investments in marketable equity and debt securities and investments in U.S. treasury securities. All marketable securities are stated at fair value. Realized gains and losses on marketable equity securities and marketable debt securities are recorded in Other income (expense), net on the Condensed Consolidated Statements of Income and Comprehensive Income. Unrealized gains and losses on marketable equity securities are reported as Other income (expense), net on our Condensed Consolidated Statement of Income and Comprehensive Income. Unrealized gains and losses on marketable debt securities reported as a component of Accumulated other comprehensive income on our Condensed Consolidated Balance Sheets.

Cash, cash equivalents and investments-current - As of April 30, 2024, our cash, cash equivalents, and investments- current totaled $178.4 million, an increase of $18.0 million from $160.4 million on December 31, 2023.

A summary of select cash flow information for the four months ended April 30, 2024 and the three months ended March 31, 2023 are as follows (in thousands):

		Four Months Ended April 30, 2024			Three Months Ended March 31, 2023
Net cash provided by operating activities	$	31,603		$	3,523
Net cash provided by (used in) investing activities	$	1,456		$	(19,708	)
Net cash used in financing activities	$	(3,609	)	$	(5,151	)

Operating activities - Our operating activities primarily consists of net income adjusted for certain non-cash items including depreciation and amortization; stock-based compensation expense and the effect of changes in operating assets and liabilities.

Net cash provided by operating activities was $31.6 million in the four months ended April 30, 2024, a $28.1 million increase compared to the three months ended March 31, 2023. This cash increase was primarily attributable to a $9.5 million increase in net income and $16.2 million increase from changes in net operating assets. The increase in cash from changes in net operating assets primarily consisted of $9.0 million increase in deferred revenue resulted from new license agreement renewal, $7.2 million increase from accounts payable, accrued liabilities and other current liabilities, $0.4 million increase in prepaid and other current assets.

Net cash provided by operating activities for the month ended April 30, 2024 was $1.7 million.

Investing activities - Our investing activities primarily consist of purchases of marketable securities and other investments and proceeds from disposal of marketable securities and other investments; proceeds from issuance of derivative instruments; payments made to settle derivative instruments and purchases of property and equipment.

Net cash provided in investing activities during the four months ended April 30, 2024 was $1.5 million primarily consisting of $65.1 million in proceeds from selling marketable securities and derivatives partially offset by a $63.6 million in cash used to purchase marketable securities and in the settlement of derivative instruments.

Net cash used in investing activities for the month ended April 30, 2024 was $5.4 million.

Net cash used in investing activities during the three months ended March 31, 2023 was $19.7 million primarily consisting of $56.3 million in cash used to purchase marketable securities and in the settlement of derivative instrument partially offset by $36.6 million in proceeds from selling marketable securities and derivatives.

Financing activities — Our financing activities primarily consist of cash dividend payments, cash proceeds from issuance of common stock, proceeds from stock option exercises and stock purchases under our employee stock purchase plan and cash paid for repurchases of our common stock.

Net cash used in financing activities during the four months April 30, 2024 was $3.6 million consisting of $3.0 million in dividend payments, and $0.6 million in shares withheld to cover payroll taxes.

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Net cash used in financing activities for the month ended April 30, 2024 was $1.9 million.

Net cash used in financing activities during the three months ended March 31, 2023 was $5.2 million consisting of $4.4 million cash paid for stock repurchases and $0.8 million in shares withheld to cover payroll taxes.

Total cash, cash equivalents, and short-term investments were $178.4 million as of April 30, 2024 of which approximately 32%, or $57.0 million, was held by our foreign subsidiaries and subject to repatriation tax effects. 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.

On February 21, 2023, the Board declared a quarterly dividend, in the amount of $0.03 per share, which was paid on April 28, 2023 to stockholders of record on April 13, 2023.

On November 13, 2023, our Board declared a quarterly dividend in the amount of $0.045 per share, which was paid on January 25, 2024 to shareholders of record on January 14, 2024.

On February 28, 2024, our Board declared a quarterly dividend in the amount of $0.045 per share, which was paid on April 19, 2024 to shareholders of record on April 12, 2024.

On May 8, 2024, our Board declared a quarterly dividend in the amount of $0.045 per share, which was paid on July 26, 2024 to stockholders of record on July 8, 2024.

On August 12, 2024, our Board declared a quarterly dividend in the amount of $0.045 per share, payable on October 18, 2024 to stockholders of record on October 4, 2024.

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.

We did not have any other significant non-cancellable purchase commitments as of April 30, 2024.

We anticipate that capital expenditures for property and equipment for the remainder of 2024 will be less than $1.0 million.

As of the date of this Transition Report on Form 10-QT, we believe we have sufficient capital resources to meet our working capital needs for the next twelve months and beyond.

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Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition, marketable securities and derivative instruments, income taxes and contingencies. We base our estimates and assumptions on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions.

Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 11, 2024, for a complete discussion of our critical accounting policies and estimates. The preparation of financial statements and related disclosures in conformity with U.S. GAAP and our discussion and analysis of our financial condition and operating results require the management to make judgments, assumptions and estimates that affect the amounts reported. See Note 1. Significant Accounting Policies of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 herein, which describes the significant accounting policies and methods used in the preparation of our condensed consolidated financial statements. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Recent Accounting Pronouncements

See Note 1. Significant Accounting Policies of the Notes to Condensed Consolidated Financial Statements for information regarding the effect of new accounting pronouncements on our financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Control and Procedures

Evaluation of Disclosure Controls and Procedures

Based on their evaluation as of April 30, 2024, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective to ensure that the information required to be disclosed by us in this Transition Report on Form 10-QT was (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting

There were no changes to internal controls over financial reporting that occurred during the four months ended April 30, 2024, that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

Inherent Limitations of Internal Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Immersion, have been detected.

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PART II

Item 1. Legal Proceedings

Immersion Corporation vs. Meta

On February 9, 2024, Immersion entered into a Patent License and Settlement Agreement (the “License and Settlement Agreement”) with Meta, pursuant to which the parties have agreed to terms for resolving the litigation matters described above (the Litigation”) and Meta will license, on a non-exclusive basis, Immersion’s patent portfolio for use in its products. Under the License and Settlement Agreement, in consideration for the license and releases granted therein, Immersion received approximately $17.3 million, after deducting for legal fees related to the Litigation (and other pending litigation) and other liabilities. Pursuant to the License and Settlement Agreement, Immersion and Meta agreed to terms for dismissal by them of the outstanding Litigation and the IPRs. On February 16, 2024, the parties dismissed the district court actions and requested permission from the Patent Trial and Appeal Board to dismiss the IPRs. The Patent Trial and Appear Board dismissed the IPRs on February 27, 2024. The description of the License and Settlement Agreement contained herein does not purport to be complete and is qualified in its entirety by reference to the License and Settlement Agreement, which is incorporated herein by reference to this Transition Report on Form 10-QT.

Immersion Corporation vs. Xiaomi Group

LGE Korean Withholding Tax Matter

On October 16, 2017, we received a letter from LG Electronics Inc. (“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 Limited from 2012 to 2014. Pursuant to an agreement reached with LGE, on April 8, 2020, the Company 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.

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 related to the 2012 to 2017 period. The Korea Tax Tribunal hearing took place on March 5, 2019. 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, the Company filed an appeal with the Korea Administrative Court on June 10, 2019. The Company has had numerous hearings before the Korea Administrative Court in the years 2019 through 2022. The Company had a hearing on April 27, 2023, and the Korea Administrative Court rendered a decision on this matter on June 8, 2023, in which it ruled that the withholding taxes and penalties which were imposed by the Korean tax authorities on LGE should be cancelled with litigation costs to be borne by the Korean tax authorities. In connection with the Korea Administrative Court’s decision, the Korean tax authorities filed an appeal on June 28, 2023, with the Seoul High Court to seek the cancellation of the lower court’s decision. The appellate case is in progress at the Seoul High Court and the first hearing and the hearing took place on November 30, 2023 and February 1, 2024, respectively. However, the next hearing will be set at a later date.

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On April 25, 2023, the Company received notice from LGE requesting the Company to reimburse LGE with respect to withholding tax imposed on LGE by the Korean tax authorities following a recent tax audit of LGE for the years 2018 through 2022. Pursuant to an agreement reached with LGE, on June 2, 2023, the Company provided a provisional deposit to LGE in the amount of KRW 3,024,877,044 (approximately $2.3 million) representing the amount of such withholding tax that was imposed on LGE, which provisional deposit would be returned to the Company to the extent the Company ultimately prevails in the appeal in the Korean courts. On June 29, 2023, on behalf of LGE, the Company filed an appeal with the Korea Tax Tribunal regarding their findings with respect to the withholding taxes related to the 2018 to 2022 period. On August 7, 2023, the Korean tax authority submitted its answer against the tax appeal. On September 8, 2023, on behalf of LGE, the Company submitted its rebuttal brief in response thereto. On September 23, 2023, the Korean tax authority, on behalf of LGE, the Company submitted an additional response brief, and on November 23, 2023, the Korea Tax Tribunal rendered a decision against LGE, dismissing the claims of the Company on the grounds that its claims are without merit. In response thereto, on behalf of LGE, the Company filed an appeal with the Korea Administrative Court on December 29, 2023. On July 25, 2024, the Korea Tax Tribunal rendered a decision against LGE, and the deadline for the court appeal of the local income claim is October 21, 2024. In addition, the Korea Administrative Court scheduled a hearing date of August 29, 2024, which was cancelled and will be rescheduled at a later date. On October 18, 2024, the Company filed a complaint and a brief with the Korea Administrative Court for the local income tax appeal.

Immersion Corporation vs. Valve Corporation (“Valve”)

On May 15, 2023, we filed a complaint against Valve in the United States District Court for the Western District of Washington. The complaint alleges that Valve’s AR/VR systems, including the Valve Index, and handheld Steam Deck, infringe seven of our patents that cover various uses of haptic effects in connection with such AR/VR systems and other video game systems. We are seeking to enjoin Valve from further infringement and to recover a reasonable royalty for such infringement.

The complaint against Valve asserts infringement of the following patents:

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

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The parties submitted their joint claim construction statement and respective positions on March 29, 2024.

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 11, 2024, except as set forth below. You should carefully consider the risk factors described in Barnes & Noble Education, Inc.’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q which are filed with the SEC and are available at www.sec.gov.

Our consolidated subsidiary, Barnes & Noble Education, is a public company which may expose us to additional costs, and our management may be required to devote substantial time to compliance initiatives.

On June 10, 2024, we acquired ownership of approximately 42.0% of the common stock of Barnes & Noble Education and as a public company, with a consolidated subsidiary that is also a public company, we incur significant legal, accounting and other expenses to comply with the requirements applicable to public companies. Many of our personnel and other resources are devoted to ensuring we, and Barnes & Noble Education, comply with requirements applicable to public companies. This further exhausts management and other personnel resources that could be used for other revenue-generating activities.

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Changes in Barnes & Noble Education’s relationships with significant clients and suppliers, including the loss or reduction in business from one or more of them, could have a material adverse impact on its business.

The products that Barnes & Noble Education sells originate from a wide variety of domestic and international vendors. During fiscal 2024, Barnes & Noble Education’s four largest retail suppliers, excluding its wholesale business which fulfills orders for all its physical and virtual bookstores, accounted for approximately 28% of its merchandise purchased, with the largest supplier accounting for approximately 7% of its merchandise purchased. Barnes & Noble Education’s wholesale business sources over 95% of its inventory from two primary channels, approximately 55% from third-party suppliers and approximately 40% from retail bookstores (including its retail bookstores). Suppliers may modify the terms of these relationships due to general economic conditions or otherwise or, especially with respect to wholesale inventory, publishers could terminate distribution to wholesalers, including Barnes & Noble Education’s wholesale business.

Barnes & Noble Education does not have long-term arrangements with most of its suppliers to guarantee availability of merchandise, content or services, particular payment terms or the extension of credit limits. If Barnes & Noble Education’s current suppliers were to stop selling merchandise, content or services to it on acceptable terms, including as a result of one or more supplier bankruptcies due to poor economic conditions or refusal by such suppliers to ship products to us due to delayed or extended payment windows as a result of Barnes & Noble Education’s own liquidity constraints, Barnes & Noble Education may be unable to procure the same merchandise, content or services from other suppliers in a timely and efficient manner and on acceptable terms, or at all. Additionally, delayed or incomplete publisher shipments of physical textbook orders, or delays in receiving digital courseware access codes, could have an adverse impact on sales, including Barnes & Noble Education’s BNC First Day Complete equitable access program, which relies upon timely receipt of inventory in advance of class start dates each academic term.

Furthermore, certain of Barnes & Noble Education’s merchandise is sourced indirectly from outside the United States. Political or financial instability, merchandise quality issues, product safety concerns, trade restrictions, work stoppages, tariffs, foreign currency exchange rates, transportation capacity and costs, inflation, civil unrest, natural disasters, public health crises, epidemics, and pandemics, and other factors relating to foreign trade are beyond its control and could disrupt its supply of foreign-sourced merchandise.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Stock Repurchase Program

On December 29, 2022, our 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 the Board on February 23, 2022. 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, as amended. 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. The December 2022 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. The December 2022 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. On August 8, 2023, the Board approved an amendment to extend the expiration date of the December 2022 Stock Repurchase Program that was set to expire on December 29, 2023 to December 29, 2024.

During 2023, we repurchased 1,217,774 shares of our common stock for $8.3 million at an average purchase price of $6.77 per share. We did not repurchase any stock during the four months ended April 30, 2024. As of April 30, 2024, we had $41.7 million available for repurchase under the December 2022 Stock Repurchase Program.

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ITEM 6. EXHIBITS

The exhibits listed in the accompanying “Exhibit Index” are filed or incorporated by reference as part of this Form 10-QT.

Exhibit Number		Exhibit Description	Incorporated by Reference
Exhibit Number		Exhibit Description	Form	File No.	Exhibit	Filing Date
3.1		Amended and Restated Bylaws of Immersion Corporation, effective as of August 12, 2022	8-K	000-38334	3.1	August 15, 2022
3.2		Amended and Restated Certificate of Incorporation of Immersion Corporation	8-K	000-27969	3.1	June 7, 2017
3.3		Certificate of Designation of the Powers, Preferences and Rights of Series A Redeemable Convertible Preferred Stock	8-K	000-27969	3.1	July 29, 2003
3.4		Amended and Restated Certificate of Designations of Series B Participating Preferred Stock of Immersion Corporation	8-K	000-27969	3.1	November 17, 2021
10.1	**	Patent License and Settlement Agreement, dated February 9, 2024, between Immersion Corporation and Meta Platforms, Inc.	10-Q	001-38334	10.1	May 8, 2024
10.2		Standby, Securities Purchase and Debt Conversion Agreement, dated as of April 16, 2024, by and among Toro 18 Holdings LLC, Barnes & Noble Education, Inc., Vital Fundco, LLC, TopLids LendCo, LLC, Outerbridge Capital Management, LLC, and Selz Family 2011 Trust.	8-K	000-27969	10.1	April 16, 2024
31.1	*	Certification of Eric Singer, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	*	Certification of J. Michael Dodson, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	+	Certification of Eric Singer, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	+	Certification of J. Michael Dodson, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	*	Inline XBRL Report Instance Document
101.SCH	*	Inline XBRL Taxonomy Extension Schema Document
101.CAL	*	Inline XBRL Taxonomy Calculation Linkbase Document
101.DEF	*	Inline XBRL Taxonomy Extension Definition
101.LAB	*	Inline XBRL Taxonomy Label Linkbase Document
101.PRE	*	Inline XBRL Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


*	Filed herewith
**	Portions of this exhibit have been omitted as confidential information
+	This certification is deemed not filed for purposes of section 18 of the Exchange Act, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act, as amended, or the Exchange Act, as amended.

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SIGNATURES

Pursuant to the requirements of the Exchange Act, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 8, 2024


IMMERSION CORPORATION

By		/S/ J. MICHAEL DODSON
		J. Michael Dodson
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

Immersion (IMMR) 10-QT2024 Q1 Quarterly report for transitional period