2016
| Delaware | 94-3180138 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
30
| Large accelerated filer | ¨ | Accelerated filer | ||||
| Non-accelerated filer | ¨ | Smaller Reporting Company | ¨ | |||
28, 2016: 28,821,402.
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| Item 1A. | |||||||||
Current assets: Cash and cash equivalents Short-term investments Accounts and other receivables (net of allowances for doubtful accounts of $36 and $28) Deferred income taxes Prepaid expenses and other current assets Total current assets Property and equipment, net Deferred income tax assets Intangibles and other assets, net Total assets Current liabilities: Accounts payable Accrued compensation Other current liabilities Deferred revenue Total current liabilities Long-term deferred revenue Other long-term liabilities Total liabilities Contingencies (Note 12) Stockholders’ equity: Common stock and additional paid-in capital — $0.001 par value; 100,000,000 shares authorized; 34,521,521 and 34,225,778 shares issued, respectively; 28,011,130 and 27,715,387 shares outstanding, respectively Accumulated other comprehensive income Accumulated deficit Treasury stock at cost: 6,510,391 shares Total stockholders’ equity Total liabilities and stockholders’ equity LOSS Revenues: Royalty and license Development, services, and other Total revenues Costs and expenses: Cost of revenues (exclusive of amortization of intangibles shown separately below) Sales and marketing Research and development General and administrative Amortization of intangibles Total costs and expenses Operating income (loss) Interest and other income (expense) Income (loss) before benefit (provision) for income taxes Benefit (provision) for income taxes Net income (loss) Basic net income (loss) per share Shares used in calculating basic net income (loss) per share Diluted net income (loss) per share Shares used in calculating diluted net income (loss) per share Other Comprehensive Income (Loss) Change in unrealized gains on short-term investments Total Other Comprehensive Income (Loss) Total Comprehensive Income (Loss) Cash flows provided by operating activities: Net income (loss) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization of property and equipment Amortization of intangibles Stock-based compensation Allowance (recovery) for doubtful accounts Changes in operating assets and liabilities: Accounts and other receivables Deferred income taxes Prepaid expenses and other current assets Other operating assets Accounts payable Accrued compensation and other current liabilities Deferred revenue Other long-term liabilities Net cash provided by operating activities Cash flows provided by (used in) investing activities: Purchases of short-term investments Proceeds from maturities of short-term investments Purchases of property and equipment Net cash provided by (used in) investing activities Cash flows provided by (used in) financing activities: Issuance of common stock under employee stock purchase plan Exercise of stock options Purchases of treasury stock Net cash provided by (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents: Beginning of period End of period Supplemental disclosure of cash flow information Cash paid for taxes Supplemental disclosure of noncash operating, investing, and financing activities Amounts accrued for property and equipment Amounts accrued for purchase of treasury stock Release of Restricted Stock Units and Awards under company stock plan 2016 “hybrid” business model, under which it provides advanced tactile software, related tools, and technical assistance to certain customers; and offers licenses to the Company's patented intellectual property (“IP”) to other customers. the licensees’ sales in any given quarter to determine the royalties due to it, the Company recognizes per unit or sales volume driven royalty revenues based on royalties reported by licensees and when all revenue recognition criteria are met. securities. 2015. Assets: U.S. Treasury securities Money market accounts Total assets at fair value Assets: U.S. Treasury securities Money market accounts Total assets at fair value U.S. Treasury securities Total U.S. Treasury securities Total Trade accounts receivable Receivables from vendors and other Accounts and other receivables Computer equipment and purchased software Machinery and equipment Furniture and fixtures Leasehold improvements Total Less accumulated depreciation Property and equipment, net Purchased patents and other purchased intangible assets Other assets Gross intangibles and other assets Accumulated amortization of purchased patents and other purchased intangibles Intangibles and other assets, net 2015. Amortization of intangibles purchased patents in the three months ended March 31, 2016 and 2015, respectively. The Remainder of 2015 2016 Total Accrued legal Accrued services Income taxes payable Other current liabilities Total other current liabilities 2016 will be amortized during the remainder of 2016. Deferred revenue for Sony Computer Entertainment Other deferred revenue Long-term deferred revenue Common stock shares available for grant Restricted stock awards outstanding Restricted stock units outstanding Shares purchased under ESPP Average price of shares purchased under ESPP Intrinsic value of shares purchased under ESPP Beginning outstanding balance Granted Exercised Forfeited Expired Ending outstanding balance Aggregate intrinsic value of options exercised Weighted average fair value of options granted 2016: December 31, 2014 Options outstanding Options vested and expected to vest using estimated forfeiture rates Options exercisable March 31, 2015 Options outstanding Options vested and expected to vest using estimated forfeiture rates Options exercisable Beginning outstanding balance Granted Exercised Forfeited and cancelled Ending outstanding balance Aggregate intrinsic value of options exercised Weighted average fair value of options granted 2016: December 31, 2014 Options outstanding Options vested and expected to vestusing estimated forfeiture rates Options exercisable March 31, 2015 Options outstanding Options vested and expected to vestusing estimated forfeiture rates Options exercisable Beginning outstanding balance Awarded Released Forfeited Ending outstanding balance Weighted average grant date fair value of RSUs granted Total fair value of RSUs released December 31, 2014 RSUs outstanding RSUs vested and expected to vestusing estimated forfeiture rates March 31, 2015 RSUs outstanding RSUs vested and expected to vestusing estimated forfeiture rates Beginning outstanding balance Awarded Released Forfeited Ending outstanding balance Weighted average grant date fair value of restricted stock awarded Total fair value of restricted stock awards released Standard Stock Options Expected life (in years) Volatility Interest rate Dividend yield Market Condition Based Stock Options Expected life (in years) Volatility Interest rate Dividend yield Employee Stock Purchase Plan Expected life (in years) Volatility Interest rate Dividend yield Statement of Operations Classifications Sales and marketing Research and development General and administrative Total Beginning balance Other comprehensive income (loss) before reclassifications Amounts reclassified from accumulated other comprehensive income (loss) Net current period other comprehensive income (loss) Ending Balance the Stock Repurchase Program. Income (loss) before provision for income taxes Benefit (provision) for income taxes Effective tax rate The benefit for income tax for the three months ended March 31, 2016 also includes non-cash tax expense on intercompany profit that resulted from the sale of certain IP rights to one of the Company's foreign subsidiaries as part of the Company's reorganization of its international operations during the second half of 2015. Discrete items recognized for the three months ended March 31, 2016 include a tax refund related to the settlement with a taxing authority and the release of certain reserves and related accrued interest. We do not expect to have any significant changes to unrecognized tax benefits during the next twelve months. Numerator: Net income (loss) Denominator: Shares used in computation of basic net income (loss) per share (weighted average common shares outstanding) Dilutive potential common shares: Restricted Stock and RSUs Stock options Shares used in computation of diluted net income (loss) per share Basic net income (loss) per share Diluted net income (loss) per share March 31, December 31, 2015 2014 ASSETS $ 40,355 $ 14,380 37,987 42,981 1,902 3,021 9,377 9,377 597 845 90,218 70,604 2,581 1,207 25,557 25,419 278 291 $ 118,634 $ 97,521 LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,670 $ 669 2,621 1,906 3,778 2,225 25,082 7,779 33,151 12,579 6,313 7,827 631 512 40,095 20,918 206,870 204,876 103 102 (82,865 ) (82,806 ) (45,569 ) (45,569 ) 78,539 76,603 $ 118,634 $ 97,521 March 31, 2016 December 31, 2015 ASSETS Current assets: Cash and cash equivalents $ 20,879 $ 25,013 Short-term investments 39,927 39,918 Accounts and other receivables (net of allowances for doubtful accounts of $15) 4,774 1,213 Prepaid expenses and other current assets 2,679 2,790 Total current assets 68,259 68,934 Property and equipment, net 4,412 4,589 Deferred income tax assets 26,262 24,633 Prepaid income taxes 6,270 6,995 Intangibles and other assets, net 245 264 Total assets $ 105,448 $ 105,415 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 2,978 $ 650 Accrued compensation 2,769 4,840 Other current liabilities 2,782 2,999 Deferred revenue 6,943 6,696 Total current liabilities 15,472 15,185 Long-term deferred revenue 1,121 2,516 Other long-term liabilities 837 1,099 Total liabilities 17,430 18,800 Contingencies (Note 12) Stockholders’ equity: Common stock and additional paid-in capital — $0.001 par value; 100,000,000 shares authorized; 35,334,795 and 34,845,310 shares issued, respectively; 28,818,901 and 28,329,416 shares outstanding, respectively 216,181 212,115 Accumulated other comprehensive income 118 86 Accumulated deficit (82,643 ) (79,948 ) Treasury stock at cost: 6,515,894 shares (45,638 ) (45,638 ) Total stockholders’ equity 88,018 86,615 Total liabilities and stockholders’ equity $ 105,448 $ 105,415 INCOME (LOSS) Three Months Ended March 31, 2015 2014 $ 16,012 $ 15,157 275 279 16,287 15,436 115 120 4,210 2,763 3,727 3,058 8,293 6,521 12 20 16,357 12,482 (70 ) 2,954 (25 ) (7 ) (95 ) 2,947 36 (1,083 ) $ (59 ) $ 1,864 $ 0.00 $ 0.07 27,818 28,370 $ 0.00 $ 0.06 27,818 29,382 1 1 1 1 $ (58 ) $ 1,865 Three Months Ended March 31, 2016 2015 Revenues: Royalty and license $ 13,448 $ 16,012 Development, services, and other 175 275 Total revenues 13,623 16,287 Costs and expenses: Cost of revenues (exclusive of amortization of intangibles shown separately below) 23 115 Sales and marketing 3,803 4,210 Research and development 4,312 3,727 General and administrative 10,090 8,293 Amortization of intangibles 3 12 Total costs and expenses 18,231 16,357 Operating loss (4,608 ) (70 ) Interest and other income (expense) 212 (25 ) Loss before benefit for income taxes (4,396 ) (95 ) Benefit for income taxes 1,701 36 Net loss $ (2,695 ) $ (59 ) Basic and diluted net loss per share $ (0.09 ) $ 0.00 Shares used in calculating basic and diluted net loss per share 28,493 27,818 Other comprehensive income Change in unrealized gains on short-term investments 32 1 Total other comprehensive income 32 1 Total comprehensive loss $ (2,663 ) $ (58 ) Three Months Ended March 31, 2015 2014 $ (59 ) $ 1,864 314 107 12 20 1,740 1,583 8 0 1,111 (171 ) (138 ) 1,020 248 140 (10 ) (16 ) 887 610 1,477 (1,638 ) 15,789 12,947 119 (27 ) 21,498 16,439 (4,994 ) (9,988 ) 10,000 10,000 (783 ) (325 ) 4,223 (313 ) 190 176 64 149 0 (6,222 ) 254 (5,897 ) 25,975 10,229 14,380 14,136 $ 40,355 $ 24,365 $ 70 $ 26 $ 965 $ 15 $ 0 $ 660 $ 2,184 $ 3,061 Three Months Ended March 31, 2016 2015 Cash flows provided by (used in) operating activities: Net loss $ (2,695 ) $ (59 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization of property and equipment 224 314 Amortization of intangibles 3 12 Stock-based compensation 2,334 1,740 Allowance for doubtful accounts — 8 Changes in operating assets and liabilities: Accounts and other receivables (3,561 ) 1,111 Deferred income taxes (1,629 ) (138 ) Prepaid income taxes 725 — Prepaid expenses and other current assets 111 248 Other operating assets (16 ) (10 ) Accounts payable 2,328 887 Accrued compensation and other current liabilities (2,270 ) 1,477 Deferred revenue (1,148 ) 15,789 Other long-term liabilities (262 ) 119 Net cash provided by (used in) operating activities (5,856 ) 21,498 Cash flows provided by (used in) investing activities: Purchases of short-term investments (9,945 ) (4,994 ) Proceeds from maturities of short-term investments 10,000 10,000 Purchases of property and equipment (65 ) (783 ) Net cash provided by (used in) investing activities (10 ) 4,223 Cash flows provided by financing activities: Issuance of common stock under employee stock purchase plan 128 190 Exercise of stock options 1,604 64 Net cash provided by financing activities 1,732 254 Net increase (decrease) in cash and cash equivalents (4,134 ) 25,975 Cash and cash equivalents: Beginning of period 25,013 14,380 End of period $ 20,879 $ 40,355 Supplemental disclosure of cash flow information Cash paid for taxes $ (529 ) $ 70 Supplemental disclosure of noncash operating, investing, and financing activities Amounts accrued for property and equipment $ — $ 965 Release of Restricted Stock Units and Awards under company stock plan $ 1,777 $ 2,184 20151.SIGNIFICANT ACCOUNTING POLICIESIt is an intellectual property (“IP”) and software licensing company focusedThe Company focuses on the creation, design, development, and licensing of patentedinnovative haptic innovations and softwaretechnologies that allow people to use their sense of touch more fully when operatingas they engage with cutting-edge products and experience the digital world around them. The Company has adopted a wide variety of digital devices.Inc.;Corporation; Immersion International, LLC; Immersion Medical, Inc.; Immersion Japan K.K.; Immersion Ltd.; Immersion Software Ireland Ltd.; Haptify, Inc.; Immersion (Shanghai) Science & Technology Company, Ltd.; and Immersion Technology International.International Ltd. All intercompany accounts, transactions, and balances have been eliminated in consolidation.2014.2015. 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.20152016 are not necessarily indicative of the results to be expected for the full year.•Persuasive evidence of an arrangement exists. For a license arrangement, the Company requires a written contract, signed by both the customer and the Company.•Delivery has occurred. The Company delivers software to customers physically and also delivers software electronically. For electronic deliveries, delivery occurs when the Company provides the customer access codes or “keys” that allow the customer to take immediate possession of the software.•The fee is fixed or determinable. The Company’s arrangement fee is based on the use of standard payment terms, which are those that are generally extended to the majority of customers. For transactions involving extended payment terms, the Company deems these fees not to be fixed or determinable for revenue recognition purposes and revenue is deferred until the fees become due and payable.•Collectibility is probable. To recognize revenue, the Company must judge collectibility of fees, which is done on a customer-by-customer basis pursuant to the Company’s credit review policy. The Company typically sells to customers with whom there is a history of successful collection. For new customers, the Company evaluates the customer’s financial condition and ability to pay. If it is determined that collectibility is not probable based upon the credit review process or the customer’s payment history, revenue is recognized when payment is received.is effective for reporting periods beginning after December 15, 2016 to December 15, 2017, with early adoption permitted but not earlier than the original effective date.adjustment. Theadjustment, and the Company is required to adopt ASU 2014-09 as of January 1, 2017, and is in the process of determining the method of adoption and evaluating the impact on its consolidated financial statements.2.FAIR VALUE MEASUREMENTSmost U.S. treasury securities and most investment-grade corporate commercial paper.20152016 and December 31, 2014.20152016 and December 31, 20142015 are classified based on the valuation technique in the table below: March 31, 2015
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 (In thousands) $ 0 $ 37,987 $ 0 $ 37,987 24,523 0 0 24,523 $ 24,523 $ 37,987 $ 0 $ 62,510 March 31, 2016 Fair value measurements using Total (In thousands) Assets: U.S. Treasury securities $ — $ 39,927 $ — $ 39,927 Money market accounts 6,041 — — 6,041 Total assets at fair value $ 6,041 $ 39,927 $ — $ 45,968 $15.8$14.8 million of cash held in banks. December 31, 2014
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 (In thousands) $ 0 $ 42,981 $ 0 $ 42,981 11,524 0 0 11,524 $ 11,524 $ 42,981 $ 0 $ 54,505 December 31, 2015 Fair value measurements using Total (In thousands) Assets: U.S. Treasury securities $ — $ 39,918 $ 39,918 Money market accounts 14,032 — — 14,032 Total assets at fair value $ 14,032 $ 39,918 $ — $ 53,950 $2.9$11.0 million of cash held in banks. March 31, 2015 Amortized
Cost Gross
Unrealized
Holding
Gains Gross
Unrealized
Holding
Losses Fair
Value (In thousands) $ 37,985 $ 2 $ 0 $ 37,987 $ 37,985 $ 2 $ 0 $ 37,987 December 31, 2014 Amortized
Cost Gross
Unrealized
Holding
Gains Gross
Unrealized
Holding
Losses Fair
Value (In thousands) $ 42,980 $ 1 $ 0 $ 42,981 $ 42,980 $ 1 $ 0 $ 42,981 March 31, 2016 (In thousands) U.S. Treasury securities $ 39,910 $ 17 $ — $ 39,927 Total $ 39,910 $ 17 $ — $ 39,927 December 31, 2015 (In thousands) U.S. Treasury securities $ 39,933 $ — $ (15 ) $ 39,918 Total $ 39,933 $ — $ (15 ) $ 39,918 20152016 and December 31, 20142015 were all due within one year. There were no transfers of instruments between Level 1 and 2 during the three months ended March 31, 20152016 and the year ended December 31, 2014.3.ACCOUNTS AND OTHER RECEIVABLES March 31,
2015 December 31,
2014 (In thousands) $ 1,530 $ 2,708 372 313 $ 1,902 $ 3,021 4.PROPERTY AND EQUIPMENT March 31,
2015 December 31,
2014 (In thousands) $ 3,487 $ 3,418 865 688 1,065 852 2,523 1,295 7,940 6,253 (5,359 ) (5,046 ) $ 2,581 $ 1,207 5.INTANGIBLES AND OTHER ASSETS March 31, December 31, 2015 2014 (In thousands) $ 4,605 $ 4,605 264 265 4,869 4,870 (4,591 ) (4,579 ) $ 278 $ 291 March 31, 2016 December 31, 2015 (In thousands) Trade accounts receivable $ 4,392 $ 935 Receivables from vendors and other 382 278 Accounts and other receivables $ 4,774 $ 1,213 March 31, 2016 December 31, 2015 (In thousands) Computer equipment and purchased software $ 3,571 $ 3,564 Machinery and equipment 959 923 Furniture and fixtures 1,365 1,361 Leasehold improvements 3,838 3,838 Total 9,733 9,686 Less accumulated depreciation (5,321 ) (5,097 ) Property and equipment, net $ 4,412 $ 4,589 March 31, 2016 December 31, 2015 (In thousands) Purchased patents and other purchased intangible assets $ 4,605 $ 4,605 Less: Accumulated amortization of purchased patents and other purchased intangibles (4,602 ) (4,599 ) Purchased patents and other purchased intangible assets, net 3 6 Other assets 242 258 Intangibles and other assets, net $ 245 $ 264 AmortizationThe Company recorded $3,000 and $12,000 in amortization of intangibles was as follows: Three Months Ended March 31, 2015 2014 (In thousands) $ 12 $ 20 table below includes estimated remaining annual amortization expense for$3,000 in net book value of purchased patents as of March 31, 2015. Estimated
Amortization
Expense (In thousands) $ 8 6 $ 14 6.COMPONENTS OF OTHER CURRENT LIABILITIES March 31, December 31, 2015 2014 (In thousands) $ 1,992 $ 1,065 1,128 518 47 69 611 573 $ 3,778 $ 2,225 7.LONG-TERM DEFERRED REVENUE March 31, 2016 December 31, 2015 (In thousands) Accrued legal $ 1,723 $ 1,458 Accrued services 261 849 Income taxes payable 175 129 Other current liabilities 623 563 Total other current liabilities $ 2,782 $ 2,999 March 31, December 31, 2015 2014 (In thousands) $ 5,604 $ 7,051 709 776 $ 6,313 $ 7,827 Deferred revenue for Sony Computer Entertainment represents deferred license revenue where payments have been received in advance of revenue recognition.8.STOCK-BASED COMPENSATION March 31, 2016 December 31, 2015 (In thousands) Deferred revenue for Sony Computer Entertainment $ — $ 1,263 Other deferred revenue 1,121 1,253 Long-term deferred revenue $ 1,121 $ 2,516 fiveseven to ten years from the date of grant. In addition to time based vesting, market condition based options are subject to a market condition: the closing price of the Company stock must exceed a certain level for a number of trading days within a specified timeframe or the options will be cancelled before the expiration of the options. Restricted stock generally vests over one year. RSUs generally vest over three years. Awards granted other than an option or stock appreciation right reduce the common stock shares available for grant under the program by 1.75 shares for each share issued. March 31, 2015 2016 729,149 1,440,213CommonStandard and market condition stock options outstanding3,681,244 3,875,15321,356 35,364527,883 565,1482015, 581,4512016, 621,269 shares had been purchased since the inception of the ESPP in 1999. Under ASC 718-10, the ESPP is considered a compensatory plan and the Company is required to recognize compensation cost related to the fair value of the award purchased under the ESPP. Shares purchased under the ESPP for the three months ended March 31, 20152016 are listed below. Shares purchased under the ESPP for the three months ended March 31, 20142015 are 17,670.23,713. The intrinsic value listed below is calculated as the difference between the market value on the date of purchase and the purchase price of the shares. Three Months
Ended
March 31,
2015 23,713 $ 8.00 $ 33,000 Three Months Ended March 31, 2016 Shares purchased under ESPP 17,711 Average price of shares purchased under ESPP $ 7.21 Intrinsic value of shares purchased under ESPP $ 23,000 option activitystock options granted under the Company’s stock option plans for the three months ended March 31, 2015 and year ended December 31, 2014: Three Months
Ended
March 31,
2015 Year
Ended
December 31,
2014 3,486,157 3,227,167 260,175 604,620 (10,862 ) (205,744 ) (60,317 ) (102,454 ) 0 (37,432 ) 3,675,153 3,486,157 $ 30,000 $ 1,125,000 3.84 4.93 Three Months Ended March 31, 2016 Beginning outstanding balance 3,596,533 Granted 344,200 Exercised (261,421 ) Forfeited (213,831 ) Expired (9,237 ) Ending outstanding balance 3,456,244 Aggregate intrinsic value of options exercised $ 650,000 Weighted average fair value of options granted 4.05 quotedexercise price of the Company’s common stock for the options that were in-the-money.2015 and December 31, 20142016 is summarized below: Number of
Shares Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Life (years) Aggregate
Intrinsic
Value
(In millions) 3,486,157 $ 8.30 4.85 $ 6.6 3,319,308 8.21 4.80 6.6 2,023,024 7.18 4.26 6.0 3,675,153 $ 8.21 4.68 $ 6.3 3,529,945 8.16 4.62 6.2 2,270,159 7.50 4.02 5.6 March 31, 2016 Options outstanding 3,456,244 $ 8.57 4.07 $ 3.6 Options vested and expected to vest using estimated forfeiture rates 3,298,519 8.51 3.96 3.6 Options exercisable 2,216,349 7.93 3.17 3.5 the summary of the market-based option activity with respect to market condition based stock options granted under the Company’s stock option plans for the three months ended March 31, 2015 and year ended December 31, 2014: Three Months
Ended
March 31,
2015 Year
Ended
December 31,
2014 50,000 0 150,000 50,000 0 0 0 0 200,000 50,000 $ 0 $ 0 3.64 5.71 The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock for the options that were in-the-money.Three Months Ended March 31, 2016 Beginning outstanding balance 200,000 Granted 75,000 Exercised — Canceled (50,000 ) Ending outstanding balance 225,000 Aggregate intrinsic value of options exercised $ — Weighted average fair value of options granted 3.68 2015 and December 31, 20142016 is summarized below: Number of
Shares Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Life (years) Aggregate
Intrinsic
Value
(In millions) 50,000 $ 11.94 6.15 $ 0.0 45,430 11.94 6.15 0.0 0 0.00 0.00 0.0 200,000 $ 9.05 6.67 $ 0.2 130,330 9.26 6.61 0.1 0 0.00 0.00 0.0 March 31, 2016 Options outstanding 225,000 $ 8.39 6.25 $ — Options vested and expected to vest using estimated forfeiture rates 201,915 8.37 6.23 — Options exercisable 37,500 8.09 5.92 — 2015 and year ended December 31, 20142016 was as follows: Three Months
Ended
March 31,
2015 Year
Ended
December 31,
2014 564,891 668,056 273,290 265,630 (261,168 ) (317,970 ) (11,865 ) (50,825 ) 565,148 564,891 $ 8.09 $ 11.35 2,185,000 3,491,000 Three Months Ended March 31, 2016 Beginning outstanding balance 487,423 Awarded 294,880 Released (210,353 ) Forfeited (44,067 ) Ending outstanding balance 527,883 Weighted average grant date fair value of RSUs granted $ 8.85 Total fair value of RSUs released 1,777,000 2015 and December 31, 20142016 is summarized below: Number of
Shares Weighted
Average
Remaining
Contractual
Life (years) Aggregate
Intrinsic
Value
(In millions) 564,891 0.84 $ 5.3 502,411 0.80 4.8 565,148 1.54 $ 5.2 437,437 1.48 4.0 March 31, 2016 RSUs outstanding 527,883 1.60 $ 4.4 RSUs vested and expected to vest using estimated forfeiture rates 403,526 1.56 3.3 2015 and year ended December 31, 20142016 was as follows: Three Months
Ended
March 31,
2015 Year
Ended
December 31,
2014 35,364 44,000 0 35,364 0 (44,000 ) 0 0 35,364 35,364 $ 0 $ 10.97 0 483,000 Three Months Ended March 31, 2016 Beginning outstanding balance 21,356 Awarded — Released — Forfeited — Ending outstanding balance 21,356 Weighted average grant date fair value of restricted stock awarded $ — Total fair value of restricted stock awards released — Three Months Ended
March 31, 2015 2014 4.7 4.7 56 % 57 % 1.4 % 1.4 % N/A N/A Three Months Ended
March 31, 2015 2014 7.0 7.0 65 % 66 % 1.9 % 2.2 % N/A N/A Three Months Ended
March 31, 2015 2014 0.5 0.5 45 % 39 % 0.1 % 0.1 % N/A N/A Three Months Ended March 31, 2016 2015 Standard Stock Options Expected life (in years) 4.5 4.7 Volatility 57 % 56 % Interest rate 1.3 % 1.4 % Dividend yield N/A N/A Three Months Ended March 31, 2016 2015 Market Condition Based Stock Options Expected life (in years) 7.0 7.0 Volatility 59 % 65 % Interest rate 1.6 % 1.9 % Dividend yield N/A N/A Three Months Ended March 31, 2016 2015 Employee Stock Purchase Plan Expected life (in years) 0.5 0.5 Volatility 53 % 45 % Interest rate 0.5 % 0.1 % Dividend yield N/A N/A income (loss)loss is as follows: Three Months Ended
March 31, 2015 2014 (In thousands) $ 264 $ 230 496 475 980 878 $ 1,740 $ 1,583 Three Months Ended March 31, 2016 2015 (In thousands) Statement of Operations Classifications Sales and marketing $ 228 $ 264 Research and development 526 496 General and administrative 1,580 980 Total $ 2,334 $ 1,740 2015,2016, there was $9.2$8.9 million related to stock options, restricted stock awards, and RSUs of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested stock options, restricted stock awards and RSUs granted to the Company’s employees and directors. This cost will be recognized over an estimated weighted-average period of approximately 2.982.70 years for standard options, 3.673.01 years for market condition based options, 2.232.35 years for RSUs, and 0.18 years for restricted stock awards. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.9.STOCKHOLDERS’ EQUITY (Loss)(loss) are included in the table below. Three Months Ended March 31, 2015 Unrealized Gains
and Losses on
Available-for Sale
Securities Foreign
Currency
Items Total (In thousands) $ 1 $ 101 $ 102 1 0 1 0 0 0 1 0 1 $ 2 $ 101 $ 103 Three Months Ended March 31, 2016 Total (In thousands) Beginning balance $ (15 ) $ 101 $ 86 Other comprehensive income before reclassifications 32 — 32 Amounts reclassified from accumulated other comprehensive income — — — Net current period other comprehensive income 32 — 32 Ending Balance $ 17 $ 101 $ 118 Directors’Directors (the "Board")’ authorized the repurchase of up to $50$50.0 million of the Company’s common stock (“Stock Repurchase Program”). In addition, on October 22, 2014, our board of directorsthe Board authorized another $30$30.0 million under the share repurchase program. The Company may repurchase its stock for cash in the open market in accordance with applicable securities laws. The timing of and amount of any stock repurchase will depend on share price, corporate and regulatory requirements, economic and market conditions, and other factors. The stock repurchase authorization has no expiration date, does not require the Company to repurchase a specific number of shares, and may be modified, suspended, or discontinued at any time. During the three months ended March 31, 2014, the Company repurchased 605,419 shares for $6.9 million at an average cost of $11.20, net of transaction costs, through open market repurchases. These amounts are classified as treasury stock on the Company’s condensed consolidated balance sheet. As of March 31, 2015,2016, the program remains available with approximately $34.4 million that may yet be purchased under it.10.INCOME TAXES Three Months Ended March 31, 2015 2014 (In thousands) $ (95 ) $ 2,947 36 (1,083 ) 37.9 % 36.7 % Three Months Ended
March 31, 2016 2015 (In thousands) Loss before benefit for income taxes $ (4,396 ) $ (95 ) Benefit for income taxes 1,701 36 Effective tax rate 38.7 % 37.9 % (provision) for income tax for the three months ended March 31, 20152016 and 20142015 resulted primarily from the Company’s federal and foreign tax recognized at statutory rates, adjusted for the tax impact of nondeductible permanent items including stock-based compensation and foreign withholding taxes.2015,2016, the Company had unrecognized tax benefits under ASC 740 “Income Taxes”, of approximately $1.8$6.2 million including interest of $75,000.and there was no applicable interest. The total amount of unrecognized tax benefits that would affect the Company’s effective tax rate, if recognized, was $275,000. There were no material changes in the amount of unrecognized tax benefits during the three months ended March 31, 2015.$2.4 million. The Company expects to releasereleased reserves totaling $310,000 including interest and recordrecorded a tax benefit due to the expirationreceipt of applicable statutes of limitations duringa tax refund related to the next twelve months.settlement with a taxing authority as noted above. The Company’s policy is to account for interest and penalties related to uncertain tax positions as a component of income tax provision.$34.9$26.3 million as of March 31, 2015,2016, consisting primarily of federal net operating loss carryforwards and timing differences between book and tax. Because the Company had net operating loss and credit carryforwards, there are open statutes of limitations in which federal, state, and foreign taxing authorities may examine the Company’s tax returns for all years from 1998 through the current period.$7.5$8.2 million against certain of its deferred tax assets, including federal, state, and certain foreign deferred tax assets. The Company has determined there is not sufficient evidence to support the release of the valuation allowance against these federal, state and foreign deferred tax assets.11.NET INCOME (LOSS) PER SHAREincome (loss)loss per share is computed using the weighted average number of common shares outstanding for the period, excluding unvested restricted stock and RSUs. Diluted net income per share is based upon the weighted average common shares outstanding for the period plus dilutive potential shares including unvested restricted stock, RSUs, and stock options using the treasury stock method. The following is a reconciliation of the numerators and denominators used in computing basic and diluted net income (loss)loss per share: Three Months Ended
March 31, 2015 2014 (in thousands except
per share amounts) $ (59 ) $ 1,864 27,818 28,370 0 316 0 696 27,818 29,382 $ 0.00 $ 0.07 $ 0.00 $ 0.06 Three Months Ended March 31, 2016 2015 Numerator: Net loss $ (2,695 ) $ (59 ) Denominator: Shares used in computation of basic and diluted net loss per share (weighted average common shares outstanding) 28,493 27,818 Basic and diluted net loss per share $ (0.09 ) $ 0.00 March 31,2015Outstanding stock options3,875,153Unvested RSUs565,148For the three months ended March 31, 2014, options to purchase approximately 1.4 million shares of common stock with exercise prices greater than the average fair market value of the Company’s stock of $11.21 per share were not included in the calculation because the effect would have been anti-dilutive.12.CONTINGENCIES March 31, 2016 2015 Outstanding stock options 3,681,244 3,875,153 Unvested RSUs 527,883 565,148 indemnificationsindemnification of varying scope to customers against claims of IP infringement made by third parties arising from the use of the Company’s IP, technology, or products. Historically, costs related to these guarantees have not been significant, and the Company is unable to estimate the maximum potential impact of these guarantees on its future results of operations.
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. ended December 31, 2015. 2015 2015. In the first quarter of 2016, we initiated arbitration against Samsung to recover revenue from products that were licensed under our agreement with them that expired at the end of 2015 that Samsung continues to ship following the expiration of the agreement. See Part II, Item 1. Legal Proceedings. REVENUES Three months ended: Royalty and license Development, services, and other Total Revenues strategic outlook. customer. $3.0 million from a medical customer. license revenue from medical customers increased by 135%, primarily due to a non-recurring license fee of $3.0 million from a medical customer. licensees, and the recognition by gaming customers of the relevance of our IP. Our mobility revenue could be adversely impacted if we receive an unfavorable result in our arbitration against Samsung. Our gaming royalty and license revenue could be adversely impacted in 2016 by the expiration of several gaming patents in 2015. OPERATING EXPENSES Three months ended: Sales and marketing % of total revenue Research and development % of total revenue General and administrative % of total revenue Amortization of intangibles % of total revenue licensees. increased legal and professional BENEFIT (PROVISION) FOR TAXES Three months ended: Benefit (provision) for income taxes Income (loss) before benefit (provision) for income taxes Effective tax rate us or that we initiate against others to enforce our IP or contractual rights. taxes, and discrete items recognized for the three months ended March 31, 2016, including a tax refund related to the settlement with a taxing authority and the release of certain reserves and related accrued interest. three months ended March 31, 2016, we continue to maintain a valuation allowance of $1.5 million against U.S. federal deferred tax assets and a valuation allowance of $6.7 million against our state and certain other foreign deferred tax assets, as there was not sufficient evidence to support the release of such valuation allowances as of March 31, 2016. $2.6 million. 2015. ESPP. 2016. IP and software licensing company focused on the creation, design, development, and licensing of patentedinnovative haptic innovations and softwaretechnologies that allow people to use their sense of touch more fully when operating a wide variety ofas they engage with cutting-edge products and experience the digital devices.world around them. Our mission is to innovate touch technology that informs, humanizes, and excites while working with customers and partners to bring these tactile experiences to consumers. WhileOur technologies are designed to facilitate the creation of high-quality haptic experiences, enable their widespread distribution, and ensure that their playback is optimized for end users. Our primary business is currently in the mobility, gaming, automotive and medical markets, but we believe that our innovations aretechnology is broadly applicable and see opportunities in evolving new markets, including entertainment, social and advertising content, virtual and augmented reality, and wearables.are currently focusingprovide advanced tactile software, related tools and technical assistance to certain customers, and offer licenses to our marketing and business development activities on the following target markets: mobilepatented IP to other customers. Our licenses enable our customers to deploy haptically-enabled devices, wearables, and consumer mobile entertainmentcontent and other content; console gaming; automotive; medical; and commercial. We manage these market areas under one operating and reportable segment.In our target markets, we license our software and IP to manufacturers for use in products soldofferings, which they typically sell under their own brand names. We and our wholly-owned subsidiaries hold more than 1,9002,200 issued or pending patents in the U.S. and other countries,worldwide, covering a wide range of digital technologies and including many of the ways in which touch-related technology can be incorporated into and between hardware products and components, systems software, application software, and digital content.short-term investments, contingencies, and litigation. We base our estimates and assumptions on historicalWe believe the following are our mostas theyand estimates are important to the portrayal of our financial condition and results of operations, and require our significantus to make judgments and estimates inabout matters that are inherently uncertain. There have been no material changes during the preparation ofthree months ended March 31, 2016 to the items we disclosed as our condensed consolidated financial statements:Revenue RecognitionWe recognize revenues in accordance with applicablecritical accounting standards, including Accounting Standards Codification (“ASC”) 605-10-S99, “Revenue Recognition” (“ASC 605-10-S99”); ASC 605-25, “Multiple Element Arrangements”(“ASC 605-25”); and ASC 985-605, “Software-Revenue Recognition” (“ASC 985-605”). We derive our revenues from two principal sources: royalty and license fees, and development contract and service fees. As described below, management judgmentspolicies and estimates must be made and used in connection with the revenue recognized in any accounting period. Material differences may result in the amount and timing of our revenue for any period based on the judgments and estimates made by our management. Specifically, in connection with each transaction, we must evaluate whether: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the fee is fixed or determinable, and (iv) collectibility is probable. We apply these criteria as discussed below.•Persuasive evidence of an arrangement exists. For a license arrangement, we require a written contract, signed by both the customer and us.•Delivery has occurred. We deliver software to our customers physically and also deliver software electronically. For electronic deliveries, delivery occurs when we provide the customer access codes or “keys” that allow the customer to take immediate possession of the software.•The fee is fixed or determinable. Our arrangement fee is based on the use of standard payment terms which are those that are generally extended to the majority of customers. For transactions involving extended payment terms we deem these fees not to be fixed or determinable for revenue recognition purposes and revenue is deferred until the fees become due and payable.•Collectibility is probable. To recognize revenue, we must judge collectibility of fees, which we do on a customer-by-customer basis pursuant to our credit review policy. We typically sell to customers with whom we have a history of successful collection. For new customers, we evaluate the customer’s financial condition and ability to pay. If we determine that collectibility is not probable based upon our credit review process or the customer’s payment history, we recognize revenue when payment is received.Royalty and license revenue— We license our patents and software to customers in a variety of industries such as mobility, gaming, automotive, and medical devices. Certain of these are variable fee arrangements where the royalties earned by us are based on unit or sales volumes of the respective licensees. We also enter into fixed license fee arrangements. The terms of the royalty agreements generally require licensees to give notification of royalties due to us within 30 – 45 days of the end of the quarter during which their related sales occur. As we are unable to reliably estimate the licensees’ sales in any given quarter to determine the royalties due to us, we recognize royalty revenues based on royalties reported by licensees and when all revenue recognition criteria are met. Certain royalties are based upon customer shipments or revenues and could be subject to change and may result in out of period adjustments. We recognize fixed license fee revenue for licenses when earned under the terms of the agreements, which is generally recognized on a straight-line basis over the expected term of the license.Development, services, and other revenue— Development, services, and other revenue are composed of engineering services (engineering services and/or development contracts), and in limited cases, PCS. Engineering services revenues are recognized under the proportional performance accounting method based on physical completion of the work to be performed or completed performance method. A provision for losses on contracts is made, if necessary, in the period in which the loss becomes probable and can be reasonably estimated. Revisions in estimates are reflected in the period in which the conditions become known. To date, such losses have not been significant. Revenue from PCS is typically recognized over the period of the ongoing obligation, which is generally consistent with the contractual term.Multiple element arrangements —We enter into multiple element arrangements in which customers purchase time-based non-exclusive licenses that cannot be resold to others, which include a combination of software and/or IP licenses, engineering services, and in limited cases PCS. For arrangements that are software based and include software and engineering services, the services are generally not essential to the functionality of the software, and customers may purchase engineering services to facilitate the adoption of our technology, but they may also decide to use their own resources or appoint other engineering service organizations to perform these services. For arrangements that are in substance subscription arrangements, the entire arrangement fee is recognized ratably over the contract term, subject to any limitations related to extended payment terms. For arrangements involving upfront fees for services and royalties earned by us based on unit or sales volumes of the respective licensees, and the services are performed ratably over the arrangement or are front-end loaded, the upfront fees are recognized ratably over the contract term and royalties based on unit or sales volume are recognized when they become fixed and determinable. As we are unable to reliably estimate the licensees’ sales in any given quarter to determine the royalties due to us, we recognize per unit or sales volume driven royalty revenues based on royalties reported by licensees and when all revenue recognition criteria are met.Stock-based Compensation —Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period, which is the vesting period.Valuation and amortization methods — We use the Black-Scholes-Merton option pricing model (“Black-Scholes model”), single-option approach to determine the fair value of standard stock options and ESPP shares. All share-based payment awards are amortized on a straight-line basis over the requisite service periods of the awards, which are generally the vesting periods. Stock-based compensation expense recognized at fair value includes the impact of estimated forfeitures. We estimate future forfeitures at the date of grant and revise the estimates if necessary, in subsequent periods if actual forfeitures differ from these estimates. The determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables include actual and projected employee stock option exercise behaviors that impact the expected term, our expected stock price volatility over the term of the awards, risk-free interest rate, and expected dividends.We use the Monte-Carlo Simulation model to value our stock options with a market condition. Valuation techniques such as the Monte-Carlo Simulation model have been developed to value path-dependent awards. The Monte-Carlo Simulation model is a generally accepted statistical technique used, in this instance, to simulate a range of future stock prices for us.The Black-Scholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable, characteristics not present in our option grantsManagement Discussion and ESPP shares. Existing valuation models, including the Black-Scholes modelAnalysis of Financial Condition and the Monte-Carlo Simulation model, may not provide reliable measuresResults of the fair values of our stock-based compensation. Consequently, there is a risk that our estimates of the fair values of our stock-based compensation awards on the grant dates may bear little resemblance to the actual values realized upon the exercise, expiration, early termination, or forfeiture of those stock-based payments in the future. Certain stock-based payments, such as employee stock options, may expire and be worthless or otherwise result in zero intrinsic value as compared to the fair values originally estimated on the grant date and reportedOperations in our financial statements. Alternatively, value may be realized from these instruments that are significantly higher than the fair values originally estimatedAnnual Report on the grant date and reported in our financial statements. There currently is no market-based mechanism or other practical application to verify the reliability and accuracy of the estimates stemming from these valuation models, nor is there a means to compare and adjust the estimates to actual values.If factors change and we employ different assumptions for estimating stock-based compensation expense in future periods, or if we decide to use a different valuation model, the future periods may differ significantly from what we have recorded in the current period and could materially affect our operating results.See Note 8 to the condensed consolidated financial statements for further information regarding stock-based compensation.Accounting for Income TaxesWe use the asset and liability method of accounting for income taxes. Under this method, income tax expense is recognizedForm 10-K for the amount of taxes payable or refundable for the current year. In addition, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized and are reversed at such time that realization is believed to be more likely than not.Our judgments, assumptions, and estimates relative to the current provision for income tax take into account current tax laws, our interpretation of current tax laws, and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. We have established reserves for income taxes to address potential exposures involving tax positions that could be challenged by tax authorities. Although we believe our judgments, assumptions, and estimates are reasonable, changes in tax laws or our interpretation of tax laws and any future tax audits could significantly impact the amounts provided for income taxes in our condensed consolidated financial statements.Our assumptions, judgments, and estimates relative to the value of a deferred tax asset take into account predictions of the amount and category of future taxable income, such as income from operations or capital gains income. Actual operating results and the underlying amount and category of income in future years could render inaccurate our current assumptions, judgments, and estimates of recoverable net deferred tax assets. Any of the assumptions, judgments, and estimates mentioned above could cause our actual income tax obligations to differ from our estimates, thus materially impacting our financial position and results of operations.See Note 10 to the condensed consolidated financial statements for further information concerning income taxes.Short-term InvestmentsOur short-term investments consist primarily of U.S. treasury bills and government agency securities purchased with an original or remaining maturity of greater than 90 days on the date of purchase. We classify all debt securities with readily determinable market values as “available-for-sale”. Even though the stated maturity dates of these debt securities may be onefiscal year or more beyond the balance sheet date, we have classified all debt securities as short-term investments as they are available for current operations and reasonably expected to be realized in cash or sold within one year. These investments are carried at fair market value, and using the specific identification method, any unrealized gains and losses considered to be temporary in nature are reported as a separate component of other comprehensive income (loss) within stockholders’ equity.For debt securities in an unrealized loss position, we are required to assess whether (i) we have the intent to sell the debt security or (ii) it is more likely than not that we will be required to sell the debt security before its anticipated recovery. If either of these conditions is met, an other-than-temporary impairment on the security must be recognized in earnings equal to the entire difference between its fair value and amortized cost basis.For debt securities in an unrealized loss position which are deemed to be other-than-temporary where neither of the criteria in the paragraph above are present, the difference between the security’s then-current amortized cost basis and fair value is separated into (i) the amount of the impairment related to the credit loss (i.e., the credit loss component) and (ii) the amount of the impairment related to all other factors (i.e., the non-credit loss component). The credit loss component is recognized in earnings. The non-credit loss component is recognized in accumulated other comprehensive loss. The credit loss component is the excess of the amortized cost of the security over the best estimate of the present value of the cash flows expected to be collected from the debt security. The non-credit component is the residual amount of the other-than-temporary impairment.When calculating the present value of expected cash flows to determine the credit loss component of the other-than-temporary impairment, we estimate the amount and timing of projected cash flows on a security-by-security basis. These calculations reflect our expectations of the performance of the underlying collateral and of the issuer to meet payment obligations as applicable. The expected cash flows are discounted using the effective interest rate of the security prior to any impairment. The amortized cost basis of a debt security is adjusted for credit losses recorded to earnings. The difference between the cash flows expected to be collected and the new cost basis is accreted to investment income over the remaining expected life of the security.Further information about short-term investments may be found in Note 2 to the condensed consolidated financial statements.The above listing is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP, with no need for management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result.20152016 AND 201420152016 and 2014.increaseddecreased by 6%16% for the three months ended March 31, 20152016 compared to the three months ended March 31, 2014,2015, driven primarily by a 6% increase in royalty and license revenue. The increasedecrease in royalty and license revenue forin our mobility business primarily as a result of the three-month period was primarily due to increasedabsence of revenue from our automotive and mobility licensees,Samsung, partially offset by decreasesincreased royalty and license revenue from our gaming, auto, and medical licensees.2015 as compared to net income of $1.9 million for the three months ended March 31, 2014.2015. The change from net income toincrease in net loss was primarily due to a $1.8 millionthe decrease in royalty and license revenue and an increase in compensation, benefits,operating expenses primarily as a result of our efforts to protect and other related costs mainly due to increased headcount overpreserve our intellectual property, including the last year,initiation of litigation against Apple, AT&T, and AT&T Mobility, as well as a $906,000 increasereduction in litigation expenses; partially offset by an $855,000 increase in royalty and license revenue.In 2015, we expect royalty and license revenue, mainly from our mobility and gaming lines of business, to beheadcount which was the major component of our revenue as our technology continues to be included in more of our licensees’ products, and as we continue to execute our patent licensing program relating to the useresult of a simple formrebalancing of haptics that we sometimes referthe organization to as “Basic Haptics.” IP litigation may cause us to expend significant financial resources in the futurealign our employees’ skill sets with our current operational and may have an adverse effect on the results of our operations. Additionally, our success could be limited by various factors, including global economic conditions, the timely release of our new products and our licensees’ products, continued market acceptance of our products and technology, and the introduction of new products by existing or new competitors. For a further discussion of these and other risk factors, see Part II, Item 1A – “Risk Factors.” March 31, Change % Change 2015 2014 (In thousands) $ 16,012 $ 15,157 $ 855 6 % 275 279 (4 ) (1 )% $ 16,287 $ 15,436 $ 851 6 % March 31, Change % Change REVENUES 2016 2015 (In thousands) Three months ended: Royalty and license $ 13,448 $ 16,012 $ (2,564 ) (16 )% Development, services, and other 175 275 (100 ) (36 )% Total Revenues $ 13,623 $ 16,287 $ (2,664 ) (16 )% increasedecrease in royalty and license revenue for the three months ended March 31, 20152016 compared to the three months ended March 31, 20142015 was primarily due to increasesdecreases in royalty and license revenue from our automotive and mobility licensees, primarily Samsung, partially offset by decreasesincreases in royalty and license revenue from our gaming and auto licensees and a non-recurring license fee from a medical licensees.increaseddecreased to $8.5 million for the three months ended March 31, 2016 from $8.6 million for the three months ended March 31, 2015 from $7.52015. Fixed payment license revenue decreased to $4.9 million for the three months ended March 31, 2014, due to an increased level of sales by our mobility and automotive customers, partially offset by a decreased level of sales by our gaming customers. Fixed payment license revenue decreased to2016 from $7.4 million for the three months ended March 31, 2015, from $7.7 million for the three months ended March 31, 2014,primarily due to decreased license fees from medical licensees.Royalty and licensethe absence of revenue from automotive customers increasedSamsung, partially offset by 37%, due to our technology being incorporated in an increased volumea non-recurring license fee of vehicles sold by our licensees.increaseddecreased by 25%60%, primarily due to increased product volume soldthe absence of revenue from Samsung, and to a lesser extent due to a lower number of mobile device shipments by existingour licensees. We anticipate that theour mobility line of business will continue to be of primary importance, but will fluctuate as mobile device manufacturers continue to recognizea result of the valueoutcomes of our IPvarious enforcement actions, the timing of introductions of new products with our technology into the market, and technologythe recognition by mobile OEMs of the relevance of our IP.as we expand our presence in Asia.decreasedincreased by 21%9%, primarily due to a decreased volume ofincreased sales by our licensees.licensees of products containing our technology. Revenue from gaming customers can fluctuate based upon consumer gaming preferences, the timing of introductions of new gaming console systems, and the timing of new products from third party peripheral makers that are our licensees.medicalautomotive customers decreasedincreased by 8%11%, primarily due to decreased license fees from theseincreased sales by our licensees. more products and as we continue our efforts to monetize our IP. We typically experience seasonally higher revenue from our gaming and mobility customers due to the reporting of holiday sales in the first calendar quarter compared to other calendar quarters.2015 and 2014,2016, revenue generated in North America, Europe and Asia represented 57%, 10% and 33% of total revenue, respectively, compared to 36%, 4% and 60% of total revenue, respectively. There was no significantrevenues, respectively, for the three months ended March 31, 2015. The shift in revenues among regions aswas mainly due to a decrease in royalty and license revenuesrevenue in each region increased at relatively consistent rates.Asia mainly due to the absence of revenue from Samsung. The increase in royalty and license revenue in North America was primarilymainly due to an increase inincreased revenue from our mobility licensees, partially offset by decreased revenue from our gaming and medicalcustomers. licensees. The increase in royalty and license revenue in Europe was primarilymainly due to an increase in revenue from automotive and medical licensees, partially offset by decreasedincreased revenue from our gaming customers. The increase in royalty and license revenue in Asia was primarily due to an increase in revenue from our mobility customers, partially offset by decreased revenue from our gaming customers. March 31, Change % Change 2015 2014 (Dollars in thousands) $ 4,210 $ 2,763 $ 1,447 52 % 26 % 18 % 8 % $ 3,727 $ 3,058 $ 669 22 % 23 % 20 % 3 % $ 8,293 $ 6,521 $ 1,772 27 % 51 % 42 % 9 % $ 12 $ 20 $ (8 ) (40 )% 0 % 0 % 0 % March 31, Change % Change OPERATING EXPENSES 2016 2015 (Dollars in thousands) Three months ended: Sales and marketing $ 3,803 $ 4,210 $ (407 ) (10 )% % of total revenue 28 % 26 % 2 % Research and development $ 4,312 $ 3,727 $ 585 16 % % of total revenue 32 % 23 % 9 % General and administrative $ 10,090 $ 8,293 $ 1,797 22 % % of total revenue 74 % 51 % 23 % Amortization of intangibles $ 3 $ 12 $ (9 ) (75 )% % of total revenue — % — % — % increasedecrease in sales and marketing expense for the three months ended March 31, 20152016 as compared to the three months ended March 31, 20142015 was primarily due to increaseda $550,000 decrease in marketing and advertising costs and a $96,000 decrease in travel costs mainly attributed to cost reductions related to trade shows, partially offset by a $251,000 increase in compensation, benefits, and other related costs of $835,000, mainly due to increased headcount; increased marketing, advertising, and public relations costs of $478,000 due to current marketing initiatives and tradeshows; and increased travel of $81,000 mainly due to increased headcount and current marketing and sales initiatives.our rebalancing efforts. We expect that sales and marketing expenses will increase in 20152016 as we continue to invest in sales and marketing to further our focus on increasing market acceptance for our touch technologies and expandingexpand our focus on the content and media business.20152016 as compared to the three months ended March 31, 20142015 was primarily due to a $497,000$677,000 increase in compensation, benefits, and other related costs and a $100,000 increase in travel costs, mainly due to increased headcount.our rebalancing efforts, partially offset by a $101,000 decrease in travel costs. We believe that continued significant investment in research and development is critical to our future success, and we expect to make increasedcontinue making investments in areas of research and technology development to support future growth including investment in our content and media business.benefits,benefits; legal and professional fees, externalfees; patent related legal, costs for patents,filing, and maintenance costs; office supplies, travel,supplies; travel; and an allocation of facilities costs. The increase in general and administrative expenses for the three months ended March 31, 20152016 as compared to the three months ended March 31, 20142015 was primarily due to a $1.4 million$984,000 increase in legal and professional and license fee expensesfees and a $473,000 increase in compensation, benefits, and other related costs. The$794,000 increase in compensation, benefits, and other related costs, was primarilymainly due to increased headcount and stock compensation expense. Theand license fee expensesfees were primarily due to a $906,000$1.3 million increase in professional services and licensing-related legal expenses mainly in preparation for our recent litigation filings; and a $232,000 increase in patent related legal, filing, and maintenance costs; partially offset by a $541,000 decrease in litigation expense relating to the HTC litigation and a $556,000 increase in other professional services and license fee expenses, partially offset by an $87,000 decrease in patent related legal costs.completed litigation. Our general and administrative expenses will continue to be significant as we manage our growing business and strategic opportunities and continue to file, maintain, license, and productenforce our IP and contractual rights, including in the current litigation against Apple and AT&T Mobility, and defend any lawsuits brought against us. March 31, Change % Change 2015 2014 (Dollars in thousands) $ 36 $ (1,083 ) $ 1,119 (103 )% $ (95 ) $ 2,947 37.9 % 36.7 % March 31, Change % Change BENEFIT FOR TAXES 2016 2015 (Dollars in thousands) Three months ended: Benefit for income taxes $ 1,701 $ 36 $ 1,665 4,625 % Loss before benefit for income taxes (4,396 ) (95 ) Effective tax rate 38.7 % 37.9 % (provision) for Income Taxes— For the three months ended March 31, 2016 we recorded a benefit for income taxes of $1.7 million yielding an effective tax rate of 38.7%. For the three months ended March 31, 2015, we recorded a benefit for income taxes of $36,000 yielding an effective tax rate of 37.9% For the three months ended March 31, 2014, we recorded a provision for income taxes of $1.1 million yielding an effective tax rate of 36.7%. The effective tax rates used for each year were estimated based upon a forecast of our full year results and include foreignthe tax withholding expenseimpact of nondeductible permanent items, including stock-based compensation incurred for the period. The benefit for income tax for the three months ended March 31, 2016 also includes non-cash tax expense on intercompany profits resulting from the sale of certain IP rights to one of our foreign subsidiaries as part of the reorganization of our international operations that occurred in the second half of 2015. The change in tax benefit (provision)for income taxes results primarily from the effects of the above described reorganization, the change in income (loss)loss before provisionbenefit for income taxes.2015,2016, we expect to use a 35% tax rate to record the federal portion of our income tax provision expense, but expect there to be a limited cash impact as we will use our net operating losses and other deferred tax assets that have been carried forward to reduce taxes paid in cash. OurAlthough we expect to reduce taxes paid in cash, our effective tax rate may differ from the federal tax rate duecould fluctuate significantly on a quarterly basis and could be adversely affected to the impact of certain planning strategiesextent actual earnings are lower than anticipated in countries that we may undertakehave lower statutory rates and higher in countries that have higher statutory rates. Based upon activity during the year.We expect to releaseThe Company released reserves totaling $310,000 including interest and recordrecorded a tax benefit due to the expirationreceipt of a tax refund related to the applicable statute of limitations during the next twelve months.settlement with a taxing authority as noted above. As of March 31, 2015, the2016, we had unrecognized tax benefits under ASC 740 "Income Taxes", of approximately $6.3 million and there was no applicable interest. The total amount of unrecognized tax benefits that would affect our effective tax rate, if recognized, is $275,000.(loss), within stockholders’ equity.2015,2016, our cash, cash equivalents, and short-term investments totaled $78.3$60.8 million, an increasea decrease of $20.9$4.1 million from $57.4$64.9 million on December 31, 2014.provided byused in operating activities during the three months ended March 31, 20152016 was $21.5$5.9 million, an increasea decrease of $5.1$27.4 million from the $16.4$21.5 million provided by operating activities during the three months ended March 31, 2014.2015. Cash provided byused in operating activities during the quarterthree months ended March 31, 20152016 was primarily the result of an increaseour net loss of $15.8$2.7 million, in deferred revenue mainly due to additional upfront payments from customers, an increasea decrease of $1.5 million due to a change in accrued compensation andother liabilities mainly from an increase in accruals for compensation and benefit related items, an increase of $1.1$3.6 million due to a change in accounts receivable mainly as a result of the timing of invoices and cash collections, a decrease of $2.3 million due to a change in accrued compensation and other liabilities mainly from a decrease in$887,000$2.3 million due to a change in accounts payable primarily arising from the timing of payments to vendors. These increases were partially offset by our net lossvendors, and an increase of $59,000.$725,000 due to a change in prepaid income taxes. Cash provided byused in operating activities during the current period was also affected by noncash charges of $2.1$2.6 million, including $1.7$2.3 million of noncash stock-based compensation and $326,000$227,000 in depreciation and amortization.2015 was $4.2 million, an increase of $4.5 million compared to the $313,0002015. Net cash used in investing activities during the three months ended March 31, 2014. Net cash provided by investing activities was due to purchases of short-term investments of $9.9 million and purchases of property and equipment of $65,000, partially offset by the maturation of short-term investments of $10.0 million partially offset by purchases of short-term investments of $5.0 million and purchases of property and equipment of $783,000.(used in) financing activities20152016 was $254,000$1.7 million compared to $5.9 million used in$254,000 provided by financing activities during the three months ended March 31, 2014,2015, an increase in cash provided of $6.1$1.5 million. Net cash provided by financing activities during the current period consisted primarily of exercises of stock options and the issuance of common stock under our ESPP of $254,000.On November 1, 2007, our board of directors authorized a share repurchase program of $50 million and on October 22, 2014 authorized another $30 million. At March 31, 2015,2016, there was $34.4 million remaining under theour previously-approved share repurchase program. We anticipate that capital expenditures for property and equipment for the year ended December 31, 20152016 will be less than $4.0$1.0 million. Cash from operations could also be affected by various risks and uncertainties, including, but not limited to the risks detailed in Part II, Item 1A titled “Risk Factors”. Additionally, if we acquire businesses, patents, or technology, our cash or capital requirements could increase substantially. In the event of such an acquisition, or should any unanticipated circumstances arise that significantly increase our capital requirements, we may elect to raise additional capital through debt or equity financing. Any of these events could result in substantial dilution to our stockholders. There is no assurance that such additional capital will be available on terms acceptable to us, if at all.2014.2015. Our principal commitments as of March 31, 20152016 consisted of obligations under operating leases. There have been no material changes in those obligations during the three months ended March 31, 2015.2015,2016, we had a liability for unrecognized tax benefits totaling $1.8$6.3 million includingwith no applicable interest, of $75,000, of which approximately $275,000$2.6 million could be payable in cash. We expect to release reserves and record a tax benefit due to the expiration of statute of limitations during the next twelve months.
2016.$62.5$46.0 million as of March 31, 2015,2016, which are subject to interest rate fluctuations. An increase in interest rates could adversely affect the market value of our cash equivalents and short-term investments. A hypothetical 100 basis point increase in interest rates would result in a decrease of approximately $197,000$182,000 in the fair value of our cash equivalents and short-term investments as of March 31, 2015.
2015,2016, our management with the participation of our Chief Executive Officer and interim Chief Financial Officer, have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended)Act) were effective to ensure that the information required to be disclosed by us in this quarterly report on Form 10-Q 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 interim Chief Financial Officer, to allow timely decisions regarding required disclosure.20152016 that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.
2013. HTC answered the amended complaint on June 28, 2013, stating affirmative defenses of (1) non-infringement, (2) invalidity, (3) prosecution history On April 21, 2015 we filed a Notice of Appeal to the United States Court of Appeals for the Federal Circuit. The appeal has been docketed as Case No. 15-1574. The appeal is fully briefed, and oral argument was heard on May 6, 2016.U.S. International Trade Commission (the “ITC”)ITC alleging that certain Motorola mobile electronic devices, including smartphones and cellular phones, infringe six of our patents that cover various uses of haptic effects in connection with touchscreens (the “ITC Complaint”). We amended the ITC Complaint on March 2, 2012 to add the following parties: HTC Corporation, HTC America Holding, Inc., HTC America, Inc., HTC (B.V.I.) Corporation, Exedea, Inc., Brightstar Corporation and Brightpoint, Inc. We subsequently withdrew HTC America Holding, Inc., HTC (B.V.I.) Corporation, Exedea, Brightstar, and Brightpoint from the ITC Complaint. The ITC instituted an investigation against Motorola Mobility, Inc., Motorola Mobility Holdings, Inc., HTC Corporation, and HTC America, Inc. on April 2, 2012.action,actions, and we are unable to estimate any potential liability we may incur.
In addition, if potential customers or customers with expiring agreements view the loss of one of our major customers as an indicator of the value of our software and/or the strength of our intellectual property, they may choose not to take or renew a license which could adversely affect our operating results. the hearing has been completed. We The terms in our agreements may be construed by our licensees in a manner that is inconsistent with the rights that we have granted to other licensees, or in a manner that may require us to incur substantial costs to resolve conflicts over license terms. Finally, as some of our key patents have expired related to video game peripherals, we may need to persuade our licensees that other patents in our portfolio continue to be relevant which could result in the expenditure of significant resources and/or failure to persuade the licensee of the relevance of the patents.respectively, for the three months ended March 31, 2015. Samsung Electronics accounted for approximately 32% and another two customers accounted for 18% and 10% of our total revenues, respectively, for the three months ended March 31, 2014. We cannot be certain that customers that have accounted for significant revenue in past periods, individually or as a group, will continue to generate similar revenue in any future period. period, including Samsung whose agreement with us expired on December 31, 2015.Our international expansion efforts subject us to additional riskscosts.currently have sales personnel in Japan, Korea, Taiwan, China,cannot predict the outcome of the appeal. If there is a final adverse ruling invalidating the patents, we could be prevented from enforcing, or earning future revenues from those patents, and Switzerlandthe likelihood that customers will take new licenses and we intend tothat current licensees will continue to expandagree to pay under their existing licenses could be reduced. The resulting reduction in license fees and royalties could harm our international activities, including continued investment in Asia. Internationalbusiness, consolidated financial position, results of operations are subject to a numberor cash flows, or the trading price of difficulties and special costs, including:compliance with multiple, conflicting and changing governmental laws and regulations;laws and business practices favoring local competitors;foreign exchange and currency risks;import and export restrictions, duties, tariffs, quotas and other barriers;difficulties staffing and managing foreign operations;difficulties and expense in enforcing IP rights;business risks, including fluctuations in demand for our technologies and products and the cost and effort to conduct international operations and travel abroad to promote international distribution and overall global economic conditions;common stock.multiple conflicting tax laws and regulations;political and economic instability; andthe possibility of an outbreak of hostilities or unrest in markets where major customers are located, including Korea and Hong Kong.Our international operations could also increase our exposure to international laws and regulations. If we cannot comply with foreign laws and regulations, which are often complex and subject to variation and unexpected changes, we could incur unexpected costs and potential litigation. For example, the governments of foreign countries might attempt to regulate our products or levy sales or other taxes relating to our activities. In addition, foreign countries may impose tariffs, duties, price controls, or other restrictions on foreign currencies or trade barriers, any of which could make it more difficult for us to conduct our business. Our international operations could also increase our exposure to complex international tax rules and regulations. Changes in, or interpretations of, tax rules and regulations may adversely affect our income tax provision. In addition, our operations outside the United States may be affected by changes in trade protection laws, policies and measures, and other regulatory requirements affecting trade and investment, including the Foreign Corrupt Practices Act and local laws prohibiting corrupt payments by our employees, vendors, or agents.original equipment manufacturer (“OEM”) customers and potential OEM customers. These internal design groups typically make choices regarding whether to implement haptics or not, whether to use our software or other standard haptic capability (e.g., haptic capability offered by the Android operating system), or even whether to develop their own haptic solutions. In instances where the design team elects not to use our software but implements unlicensed haptic capability, we may seek to enforce our IP. If the OEMcustomer is unwilling to enter into a license agreement, we may elect to pursue litigation which would harm our relationship with the OEMcustomer and could harm our relationships with other licensees or our ability to gain new customers, who may postpone licensing decisions pending the outcome of the litigation or dispute, or who may, as a result of such litigation, choose not to adopt our technologies. In addition, these legal proceedings could be very expensive and could have a negative impact on our financial results.OEMlicense agreements, we typically grant licenses to our patent portfolio for one or more specified fields of use. Depending on the specific terms of our agreement with an OEM,a customer, the OEM’scustomer's internal design group may be able to develop technology that is less expensive to implement or that enables products with higher performance or additional features than our own technology and products. Many of these internal design groups have substantially greater resources, greater financial strength and lower cost structures than we do. They also have the inherent advantage of access to internal corporate strategies, technology roadmaps and technical information. As a result, they may be able to bring alternative solutions to market more easily and quickly.In addition to licensing OEMs directly, weadvanced technologiesfully-featured software into their integrated circuits for use in certain electronic devices. While our relationships with these semiconductor manufacturers increases our distribution channels by leveraging their sales channels, it is possible that OEMscustomers may elect to implement haptics using less advancedfully-featured software integrated circuit solutions rather than the higher-end solutions we offer directly, which may negatively impact our financial results.We are currently involved in appealing a judgment invalidating three of our patents; any final judgment invalidation or limiting of the scope of these patents could harm our business.As more fully described under Part II, Item 1- “Legal Proceedings,” we are currently involved in appealing a judgment invalidating three of our patents. We cannot predict the outcome of the appeal. If there is a final adverse ruling invalidating the patents, we could be prevented from enforcing, or earning future revenues from those patents, and the likelihood that customers will take new licenses and that current licensees will continue to agree to pay under their existing licenses could be reduced. The resulting reduction in license fees and royalties could harm our business, consolidated financial position, results of operations or cash flows, or the trading price of our common stock.Our current or any future litigation is expensive, disruptive, and time consuming, and will continue to be, until resolved, and regardless of whether we are ultimately successful, could adversely affect our business.We have been in the past and are currently a party to various legal proceedings. Due to the inherent uncertainties of litigation, we cannot accurately predict how these cases will ultimately be resolved. We anticipate that currently pending or any future litigation will continue to be costly and that future litigation will result in additional legal expenses, and there can be no assurance that we will be successful or be able to recover the costs we incur in connection with litigation. We expense litigation costs as incurred, and only accrue for costs that have been incurred but not paid to the vendor as of the financial statement date. Although protecting our intellectual property is a fundamental part of our business, at times, our litigation has diverted, and could continue to divert, the efforts and attention of some of our key management and personnel away from our licensing transactions. As a result, until such time as it is resolved or concluded, litigation could adversely affect our business. Further, any unfavorable outcome could adversely affect our business. For additional background on our litigation, please see Note 12 to the condensed consolidated financial statements in Part I, Item 1- “Financial Statements and Supplementary Data” and Part II, Item 1- “Legal Proceedings”.comecomes from third-party peripheral makers who make licensed gaming products designed for use with popular video game console systems from Microsoft, Sony, and Nintendo. Video game console systems are closed, proprietary systems, and video game console system makers typically impose certain requirements or restrictions on third-party peripheral makers who wish to make peripherals that will be compatible with a particular video game console system. If third-party peripheral makers cannot or are not allowed to satisfy these requirements or restrictions, our gaming royalty revenues could be significantly reduced. Furthermore, should a significant video game console maker choose to omit touch-enabling capabilities from its console systems or somehow restrict or impede the ability of third parties to make touch-enabling peripherals, it could lead our gaming licensees to stop making products with touch-enabling capabilities, thereby significantly reducing our gaming royalty revenues. Also, if the gaming industry changes such that mobile or other platforms increase in popularity at the expense of traditional video game consoles, our gaming royalty revenues could be substantially reduced if we are unable to enter into replacement arrangements enabling us to license our software or IP in connection with gaming on such mobile or other platforms.recently announced the introduction of haptics-enabled mobile game applications from well-known publishers.publishers and haptics-enabled advertisements and movie trailers. Market acceptance of these new technologies and software offerings will be dependent in part on our ability to show that mobile content enhanced with haptics generates greater levels of consumer engagement, improves customer acquisition and retention measures, increases monetization, improves long-term content recall and generates more positive levels of enjoyment and brand sentiment. While our early pilot and user studies are encouraging, such data is preliminary and may be inaccurate or may not be accepted by third parties. While we do not anticipate any meaningfulsignificant revenue associated with this initiative in 2015,2016, if we are unable to successfully establish these new offerings, our results of operations could be negatively impacted. In addition, if we fail to properly manage the licensing of rights in our OEM and content businesses, we may inadvertently impair our ability to monetize our technology in one of these businesses and our results of operations would be negatively impacted. 2014, 98% of our total revenues were royalty and license revenues, respectively. We do not control or influence the design, manufacture, quality control, promotion, distribution, or pricing of products that are manufactured and sold by our licensees, nor can we control consolidation within an industry which could either reduce the number of licensable products available or reduce royalty rates for the combined licensees. In addition, we generally do not have commitments from our licensees that they will continue to use our technologies in current or future products. As a result, products incorporating our technologies may not be brought to market, achieve commercial acceptance, or otherwise generate meaningful royalty revenue for us. For us to generate royalty and license revenue, licensees that pay us per-unit royalties must manufacture and distribute products incorporating our touch-enabling technologies in a timely fashion and generate consumer demand through marketing and other promotional activities. If our licensees’ products fail to achieve commercial success, or if their products are recalled because of quality control problems or if they do not ship products incorporating our touch-enabling technologies in a timely fashion or fail to achieve strong sales, our revenues will not grow and could decline.If we fail to protect and enforce our IP rights or if we fail to continuously develop or acquire successful innovations and obtain patents on these innovations, our ability to license our technologies and generate revenues would be impaired.Our business depends on generating revenues by licensing our IP rights and by customers selling products that incorporate our technologies. We rely on our significant patent portfolio to protect our proprietary rights. If we are not able to protect and enforce those rights, our ability to obtain future licenses or maintain current licenses and royalty revenue could be impaired. In addition, if a court or patent office were to limit the scope, declare unenforceable, or invalidate any of our patents, current licensees may refuse to make royalty payments, or they may choose to challenge one or more of our patents. It is also possible that:our pending patent applications may not result in the issuance of patents;
In addition, our patents will continue to expire according to their terms, including the expiration of several gaming patent licenses in 2015. Our failure to continuously develop or acquire successful innovations and obtain patents on those innovations could significantly harm our business, financial condition, results of operations, or cash flows.
We also rely on licenses, confidentiality agreements, other contractual agreements, and copyright, trademark, and trade secret laws to establish and protect our proprietary rights. It is possible that:
We have in the past initiated legal proceedings to protect our intellectual property and may need to continue to do so in the future. Any legal or administrative proceeding initiated by us to protect or enforce our IP rights may result in substantial legal expenses and may divert our management’s time and attention away from our other business operations, which could significantly harm our business.
We had an accumulated deficit of $83 million as of March 31, 2015, have only recently achieved profitability,2016 and may not maintainreturn to profitability in the future.
Furthermore, we believe that there are a limited number of engineering and technical personnel that are experienced in haptics. Management and other key employees may voluntarily terminate their employment with us at any time without notice. The loss of management or key personnel could delay product development cycles or otherwise harm our business.
As our business grows, such growth may place a significant strain on our management and operations and,
We planactivities. This corporate restructuring activity is anticipated to continue expandingallow us to reduce our overall effective tax rate through changes in how we develop and use our intellectual property and the structure of our international sales operations, including by entering into transfer-pricing arrangements that establish transfer prices for our intercompany transactions.
condition may be negatively impacted.
2017,2018, ASU No. 2014-09 “Revenue from Contracts with Customers: Topic 606”, can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business.Market.Market and other regulations that may be enacted from time-to-time. The requirements of these and other rules and regulations have increased and we expect will continue to increase our legal, accounting and financial compliance costs, will make some activities more difficult, time-consuming and costly, and may also place undue strain on our personnel, systems and resources.actuallycontinue to be made under the program, nor is there any assurance that a sufficient number of shares of our common stock will be repurchased to satisfy the market’s expectations. Furthermore, there can be no assurance that any repurchases conducted under the plan will be made at the best possible price. The existence of a stock repurchase program could also cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock. Additionally, we are permitted to and could discontinue our stock repurchase program at any time and any such discontinuation could cause the market price of our stock to decline.
1, 20156, 2016IMMERSION CORPORATION ByBy /s/ Paul NorrisVictor ViegasPaul NorrisVictor ViegasPresident, Chief Executive Officer, Interim Chief Financial Officer and Principal Accounting Officer
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| Number | Description | |
| 31.1 | Certification of Victor Viegas, Chief Executive Officer | |
| 32.1* | Certification of Victor Viegas, Chief Executive Officer | |
| 101.INS | XBRL Report Instance Document | |
| 101.SCH | XBRL Taxonomy Extension Schema Document | |
| 101.CAL | XBRL Taxonomy Calculation Linkbase Document | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | XBRL Taxonomy Label Linkbase Document | |
| 101.PRE | XBRL Presentation Linkbase Document | |
| * | This certification is deemed not filed for purposes of section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act. | |
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