IMMERSION CORP

1. SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Immersion Corporation (the “Company”, “Immersion”, “we” or “us”) was incorporated in 1993 in California and reincorporated in Delaware in 1999. We focus on the creation, design, development, and licensing of innovative haptic technologies that allow people to use their sense of touch more fully as they engage with products and experience the digital world around them. We offer licenses for our patented technology to our customers.

Principles of Consolidation and Basis of Presentation

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

Reclassification

Certain prior year amounts have been reclassified to conform with the current year presentation.

Restatement of Prior Year's Balance Sheets

In 2023, we reclassified $1.4 million income tax liabilities from Other current liabilities to Other noncurrent liabilities on the Consolidated Balance Sheets as of December 31, 2022. We determined that this error is immaterial to the financial statements taken as a whole.

Use of Estimates

The preparation of consolidated financial statements in conformity with the generally accepted accounting principles in the United States ("GAAP") requires estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results may differ materially from these estimates on an ongoing basis, we evaluate our estimates, including those related to revenue recognition, fair value of financial instruments, income taxes, long-term deposits for withholding taxes and stock-based compensation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Foreign Currency Translation

The functional currency of our foreign subsidiaries is U.S. dollars. Gains and losses from the remeasurement financial statements of the foreign subsidiaries into the U.S. dollars and from foreign currency transactions are reported as Other income (expense), net in our Consolidated Statements of Income and Other Comprehensive Income.

Revenue Recognition

Our revenue is primarily derived from fixed fee license agreements and per-unit royalty agreements, along with less significant revenue earned from development, services and other revenue.

Fixed fee license revenue

We recognize revenue from a fixed fee license agreement when we have satisfied our performance obligations, which typically occurs upon the transfer of rights to our technology upon the execution of the license agreement. However, in certain contracts, we grant a license to our existing patent portfolio at the inception of the license agreement as well as rights to the portfolio as it evolves throughout the contract term. For such arrangements, we have concluded that there aretwo separate performance obligations:

If a fixed fee license agreement contains only Performance Obligation A, we recognize the revenue from the agreement at the inception of the contract. For fixed fee license agreements that contain both Performance Obligation A and B, we allocate the transaction price based on the standalone price for each of thetwo performance obligations. We use a number of factors primarily related to the attributes of our patent portfolio to estimate standalone prices related to Performance Obligation A and B. Once the transaction price is allocated, the portion of the transaction price allocable to Performance Obligation A is recognized in the period the license agreement is signed and the customer can benefit from rights provided in the contract. The portion allocable to Performance Obligation B is recognized on a straight-line basis over the contract term which best represents the ongoing and continuous nature of the patent prosecution process. For such contracts, a contract liability account is established and included within Deferred revenue-currentand Deferred Revenue-noncurrenton the Consolidated Balance Sheets. As the rights and obligations in a contract are interdependent, contract assets and contract liabilities that arise in the same contract are presented on a net basis.

Some of our license agreements contain fixed fees related to past infringements. Such fixed fees are recognized as revenue or recorded as a deduction to our operating expense in the quarter the license agreement is signed.

Payments for fixed fee license contracts typically are due in full within 30 -45 days from execution of the contract. From time to time, we enter into a fixed fee license contract with payments due in a number of installments payable throughout the contract term. In such cases, we determine if a significant financing component exists and if it does, we will recognize more or less revenue and corresponding interest expense or income, as appropriate.

Per-unit Royalty revenue

We record per-unit royalty revenue in the same period in which the licensee’s underlying sales occur. When we do not receive the per-unit licensee royalty reports for sales during a given quarter within the time frame that allows us to adequately review the reports and include the actual amounts in our quarterly results for such quarter, we accrue the related revenue based on estimates of our licensees’ underlying sales, subject to certain constraints on our ability to estimate such amounts. We develop such estimates based on a combination of available data including, but not limited to, approved customer forecasts, a look back at historical royalty reporting for each of our customers, and industry information available for the licensed products.

As a result of accruing per-unit royalty revenue for the quarter based on such estimates, adjustments will be required in the following quarter to true up revenue to the actual amounts reported by its licensees. In 2023, we recorded $0.4 million, $0.3 million, $0.5 million and $0.8 million adjustments to increase royalty revenue in the first, second, third and fourth quarters, respectively. In 2022, we recorded $0.3 million, $0.5 million and $0.5 million adjustments to increase royalty revenue in the first, second and fourth quarters, respectively. In the third quarter of 2022, we recorded adjustments of $0.2 million to decrease royalty revenue.

Certain of our per-unit royalty agreements contain minimum royalty provisions which sets forth minimum amounts to be received by us during the contract term. Under Accounting Standard Codification 606, Revenue from Contracts with Customers, (“ASC 606”), minimum royalties are considered a fixed transaction price to which we have a right once all other performance obligations, if any, are satisfied. We recognize all minimum royalties as revenue at the inception of the license agreement, or in the period in which all remaining revenue recognition criteria have been met. We account for the unbilled minimum royalties as contract assets as Prepaid and other current assetsand Other assets, net on our Consolidated Balance Sheets, and the balance of such contract assets will be reduced by the actual royalties to be reported by the licensee during the contract term until fully utilized, after which point any excess per-unit royalties reported are recognized as revenue. As the rights and obligations in a contract are interdependent, contract assets and contract liabilities that arise in the same contract are presented on a net basis.

Payments of per-unit royalties typically are due within 30 to 60 days from the end of the quarter in which the underlying sales took place.

Development, services, and other revenue

As the performance obligation related to our development, service and other revenue is satisfied over a period of time, we recognize such revenue evenly over the period of performance obligations, which is generally consistent with the contractual term.

Deferred Revenue

Deferred revenue consists of amounts that have been invoiced or paid but have not been recognized as revenue. The amounts are primarily derived from our fixed license fee agreements under which we are obliged to transfer both rights to our patent portfolio that exists when the contract is executed and rights to its patent portfolio as it evolves over the contract term.

Deferred revenue that will be recognizable during the succeeding 12-month period is recorded as Deferred Revenue-current, and the remaining deferred revenue is recorded as Deferred revenue noncurrent on the Consolidated Balance Sheets.

Fair Value Measurement

We measure the fair value of financial assets as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We use the GAAP fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Thethree levels of the fair value hierarchy are as follows:

Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Unobservable inputs for the asset or liability, which include assumptions market participants would use in pricing the asset or liability.

Cash Equivalents

We consider all highly liquid instruments with an original maturity of 90 days or less at the date of purchase to be cash equivalents.

Certificates of deposit

Certificate of deposits are reported at fair value and classified as current or noncurrent assets based on their initial maturity days at purchase. Certificates of deposit with original maturity days of 90 days or less are reported as cash equivalents, between 91 days and 1 year are reported as Investment- current. Certificates of deposit with longer than 1-year remaining term are reported as Investments-noncurrenton the Consolidated Balance Sheets.

Investments in Marketable Securities

Equity Securities

We hold marketable equity investments over which we do not have a controlling interest or significant influence. Our investments in marketable equity securities are classified based on the nature of the securities and their availability for use in current operations.

As of December 31, 2023 our marketable equity securities primarily consisted of mutual funds and corporate common and preferred stocks. Marketable equity investments are reported as Investment-current on the Consolidated Balance Sheets. They are measured using quoted prices in active markets with changes recorded in Other income (expense), net on the Consolidated Statements of Income and Other Comprehensive Income.

Debt Securities

Debt securities primarily consist of investments in corporate bonds and U.S. treasury securities and are classified and accounted for as available-for-sale at the time of purchase. We report marketable debt securities as eitherInvestments-current orInvestments-noncurrenton ourConsolidated Balance Sheets based on each instrument’s underlying contractual maturity date and management's intended holding period.

Unrealized gains on available-for-sale securities are included in Accumulated other Comprehensive incomeon the Consolidated Balance Sheets, except for credit-related impairment losses for available-for-sale debt securities. Available-for-sale securities in an unrealized loss position are written down to its fair value with the corresponding charge recorded in Interest and other income (loss), net, on our Consolidated Statement of Income and Comprehensive Income, if it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, or we have the intention to sell the security. Credit-related impairment losses, not to exceed the amount that fair value is less than the amortized cost basis, are recognized through an allowance for credit losses with changes in the allowance for credit losses recorded in Interest and other income (loss), net in the Consolidated Statements of Income and Comprehensive Income. As of December 31, 2023, we have determined it is more likely than not we will hold the securities until maturity or a recovery of the cost basis forall our available-for-sale debt securities with unrealized loss positions.

We elected to exclude the applicable accrued interest from both the fair value and amortized cost basis. Applicable accrued interest, net of the allowance for credit losses (if any), of $0.4 million and $0.2 million, is recorded in Accounts and other receivables on the Consolidated Balance Sheets as of December 31, 2023 and 2022, respectively.

Realized gains and losses from the sales of available-for-sale debt securities are determined based on the specific identification method and are reported in Interest and other income (loss), net in the Consolidated Statements of Income and Comprehensive Income.

Derivative Financial Instruments

We invest in derivatives that are not designated as hedging instruments and which consist of call and put options. When we sell call or put options, the premium received is reported as Other current liabilities on our Consolidated Balance Sheets. When we purchase put or call options, the premium paid is reported as Investments-current on our Consolidated Balance Sheets. The carrying value of these options is adjusted to the fair value, measured using the practical expedient of the midpoint of the bid-ask spread, at the end of each reporting period until the options expire. Gains and losses recognized from the periodic adjustments to fair value are recognized as Interest and other income (loss), net on our Consolidated Statements of Income and Comprehensive Income.

Accounts and Other Receivables

Accounts and other receivables are primarily comprised of trade receivables that are recorded at the invoiced amount, net of an allowance for credit losses. Such accounts receivable have been reduced by an allowance for credit losses, which is our best estimate of the amount of probable credit losses in our existing accounts receivable. We assess our allowance for credit losses on trade receivables by taking into consideration information about past events, such as our historical trend of write-offs, forecasts of future economic conditions, and customer-specific circumstances, such as bankruptcies and disputes. Expense for credit losses on trade receivables is recorded in operating expenses on ourConsolidated Statements of Income and Comprehensive Income. The allowance for doubtful accounts as of December 31, 2023 and 2022 was not material.

Leases

We lease our office space under lease arrangements with expiration dates on or before April 25, 2024. Operating leases are accounted for as right-of-use (“ROU”) assets and lease liability obligations in our Consolidated Balance Sheets under Other assets, net, Other current liabilities and Other long-term liabilities, respectively. ROU assets and lease liabilities are recognized at lease commencement date based on the present value of lease payments over the lease term. We elect to combine lease and non-lease components and account for them as a single lease component. As our leases typically do not provide an implicit rate, we estimate our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. ROU assets also include any lease payments made and exclude lease incentives and direct costs. Lease expense is recognized on a straight-line basis over the lease term. We elected to not present leases with an initial term of 12 months or less on our Consolidated Balance Sheets. Variable lease payments primarily include reimbursements of costs incurred by lessors for common area maintenance and utilities and are expensed as incurred and are not included within the ROU asset and lease liability calculation.

Research and Development

Research and development expenses primarily consisted of personnel-related costs, including payroll and stock-based compensation, outside consulting expenses and allocations of corporate overhead expenses. Research and development costs are expensed as incurred.

Legal Proceedings and Litigations

We are involved in legal proceedings on an ongoing basis. If we believe that a loss arising from such matters is probable and can be reasonably estimated, we accrue the estimated loss in our Consolidated Financial Statements. If only a range of estimated losses can be determined, we accrue an amount within the range that, in our judgment, reflects the most likely outcome; if none of the estimates within that range is a better estimate than any other amount, we accrue the low end of the range.

Patent Defense Costs

Costs associated with patent applications, patent prosecution, patent defense and the maintenance of patents are charged to expense as incurred.

We use the asset and liability method of accounting for income taxes. Under this method, income tax expense is recognized 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 a time that realization is believed to be more-likely-than-not.

Stock-based Compensation

We recognize stock-based compensation cost for shares, net of estimated forfeiture over the requisite service period of the award, which is the vesting period. We use the Black-Scholes Merton option pricing model to determine the fair value of stock options and employee stock purchase plan shares. We estimate the fair value of market-performance based stock options and restricted stock units using a Monte Carlo simulation model which requires the input of assumptions, including expected term, stock price volatility and the risk-free rate of return. In addition, judgment is also required in estimating the number of stock-based awards that are expected to be forfeited. Forfeitures are estimated based on historical experience at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Concentrations of Credit Risk and Significant Customers

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, and accounts and other receivables. Deposits held by banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand.

We are subject to a concentration of revenues given certain key licensees that contributed a significant portion of our total revenues. See Note 11. Segment Reporting, Geographic Information and Significant Customers of the Notes to Consolidated Financial Statements for more details on customer revenue concentration.

We license technology primarily to companies in North America, Europe, and Asia. To reduce credit risk, management performs periodic credit evaluations of the financial conditions of our customer. We periodically evaluate potential credit losses to ensure adequate reserves are maintained, but historically we have not experienced any significant losses related to individual customers or groups of customers in any particular industry or geographic area. As such, our reserves for credit losses for the years ended December 31, 2023 and December 31, 2022 were not material due to our customers' low credit risk.

Certain Significant Risks and Uncertainties

We operate in multiple industries and our operations can be affected by a variety of factors. For example, management believes that changes in any of the following areas could have a negative effect on our future financial position and results of operations:

· Our competition and the market in which we operate; our customers and suppliers;

· Our revenue, trends related thereto and the recognition and components thereof;

· Our costs and expenses,

· Our investment of surplus funds and sales of marketable securities;

· Seasonality and demand;

· Our investment in research and technology development;

· Changes to general and administrative expenses;

· Our foreign operations and the reinvestment of our earnings related thereto;

· Our investment in and protection of our IP;

·Expiration of haptic technology patents;

·Changes in or obsolescence of licensed technology;

· Our employees;

· Capital expenditures and the sufficiency of our capital resources;

· Unrecognized tax benefits and tax liabilities;

· The impact of changes in interest rates and foreign exchange rates, as well as our plans with respect to foreign currency hedging in general;

· Changes in laws and regulations, including with respect to taxes; and

· Our plans related to and the impact of current and future litigation and arbitration;

Segment Information

We operate asone operating segment because our Chief Executive Officer, as our chief operating decision maker(“CODM”), reviews financial information, on a consolidated basis for purposes of making decisions regarding allocating resources and assessing performance.

The CODM approves budgets and allocates resources to and assesses our business performance using information about our revenue and operating loss. There is onlyone segment that is reported to management.

Recent Account Pronouncements Not Yet Adopted************

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

2. REVENUE RECOGNITION

Disaggregated Revenue

The following table presents the disaggregation of our revenue for theyears ended December 31, 2023, and 2022 (in thousands):

Contract Assets

As of December 31, 2023,2022 and 2021, we had contract assets of $7.7 million, $7.7 million and $12.4 million included within Prepaid expenses and other current assets, respectively. As of December 31, 2023,2022 and 2021, $0.1 million and $0.5 million and $1.7 million included within Other assets on the Consolidated Balance Sheets, respectively.

Total contract assets decreased by $0.7 million from January 1, 2023 to December 31, 2023, primarily due to actual royalties billed during the year. Contract assets decreased by $5.9 million from January 1, 2022 to December 31, 2022, primarily due to actual royalties billed and the reduction in contact assets balance following our settlement agreement with Marquardt GmbH.

Deferred Revenue

Based on contracts signed and payments received as of December 31, 2023, we expect to recognize $12.6 million in revenue related to Performance Obligation B under our fixed fee license agreements, which are satisfied over time, including $9.6 million overone tothree years and $3.0 million over more than three years.

As of December 31, 2022, total deferred revenue was $17.4 million, of which $4.8 million was recognized during the year ended December 31, 2023.

As December 31, 2021, total deferred revenue was $21.5 million, of which$4.9 million was recognized during 2022. In 2022, we recorded a $0.8 million increase in deferred revenue as a result of a new contract with a customer.

3. INVESTMENTS AND FAIR VALUE MEASUREMENTS

Marketable Securities

We invest surplus funds in excess of operational requirements in a diversified portfolio of marketable securities, with the objectives of delivering competitive returns, maintaining a high degree of liquidity, and seeking to avoid the permanent impairment of principal. We periodically evaluate the need for an allowance for credit losses on investment securities available-for-sale on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.

Marketable securities as of December 31, 2023 and December 31, 2022 consisted of the following (in thousands):

The amortized costs and fair value of marketable debt securities, by contractual maturity, as of December 31, 2023 and December 31, 2022 (in thousands) are as follows:

As of December 31, 2023, the fair value of available-for-sale debt securities in unrealized loss position for corporate bonds and U.S. treasury securities were $7.1 million and $2.7 million, respectively, with anaggregated loss of $0.2 million. As of December 31, 2022, the fair value of available-for-sale debt securities in unrealized loss position for corporate bonds and U.S. treasury securities were $13.3 million and $2.7 million, respectively, with an aggregated loss of $0.3 million. For all available-for-sale debt securities that were in unrealized loss positions, we have determined that it is more likely than not we will hold the securities until maturity or a recovery of the cost basis. We hadno credit-related impairment loss as of December 31, 2023 and 2022.

Derivative Financial Instruments

Our derivative instruments consisted of written put options sold at their fair value as of the balance sheet dates. These derivative instruments are reported as Other current liabilities on our Consolidated Balance Sheetsas of December 31, 2023 and December 31, 2022 (in thousands):

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

Fair Value Measurements

Our financial instruments measured at fair value on a recurring basis consisted of money-market funds, mutual funds, equity securities, corporate debt securities and derivatives. Equity securities are classified within Level 1 of the fair value hierarchy as they are valued based on quoted market price in an active market. Corporate debt securities and derivative instruments are valued based on quoted prices in markets that are less active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency are generally classified within Level 2 of the fair value hierarchy.

Financial instruments valued based on unobservable inputs which reflect the reporting entity’s own assumptions or data that market participants would use in valuing an instrument are generally classified within Level 3 of the fair value hierarchy. We did not hold Level 3 financial instruments as of December 31, 2023 and December 31, 2022

Financial instruments measured at fair value on a recurring basis as of December 31, 2023 and December 31, 2022 are classified based on the valuation technique in the table below (in thousands):

If quoted prices for identical instruments are available in an active market, debt securities are classified within Level 1 of the fair value hierarchy. If quoted prices for identical instruments in active markets are not available, fair values are estimated using quoted prices of similar instruments and are classified within Level 2 of the fair value hierarchy. To date, all of our debt securities can be valued using one of these two methodologies.

Our derivative financial instruments are classified within Level 2 of the fair value hierarchy because the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets.

4. BALANCE SHEETS DETAILS

Cash and Cash Equivalents

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

(1)Represents certificates of deposit with initial maturity days of 90 days or less.

Investments-current

Investments - current were as follows (in thousands):

(2) Represents investments with remaining maturity days between 91 days andone year.

Accounts and Other Receivables, Net

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

Allowance for credit losses as of December 31, 2023 and December 31, 2022 were not material.

Prepaid expenses and Other Current Assets

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

Investments-noncurrent

Investments- noncurrent are as follows (in thousands):

Other Assets

Other assets are as follows (in thousands):

Other Current Liabilities

Other current liabilities are as follows (in thousands):

As of December 31, 2023 and 2022, total other noncurrent liability were $4.9 million and 1.9 million, respectively, primarily consisting of long-term deferred tax credits and liabilities.

5. CONTINGENCIES

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

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

LGE Korean Withholding Tax Matter

On October 16, 2017, we received a letter from LG Electronics Inc. (“LGE”) requesting that we reimburse LGE with respect to withholding tax imposed on LGE by the Korean tax authorities following an investigation where the tax authority determined that LGE failed to withhold on LGE’s royalty payments to Immersion Software Ireland, a subsidiary of the Company, from 2012 to 2014. Pursuant to an agreement reached with LGE, on April 8, 2020, we provided a provisional deposit to LGE in the amount of KRW 5,916,845,454 (approximately $5.0 million) representing the amount of such withholding tax that was imposed on LGE, which provisional deposit would be returned to us to the extent we ultimately prevail in the appeal in the Korean courts. In the second quarter of 2020, we recorded this deposit inLong-term deposits on our* Condensed Consolidated Balance Sheets*. In the fourth quarter of 2021, we recorded an impairment charge of $0.8 million related to the long-term deposits paid to LGE.

On November 3, 2017, on behalf of LGE, we filed an appeal with the Korea Tax Tribunal regarding their findings with respect to the withholding taxes related to the 2012 to 2017 period. The Korea Tax Tribunal hearing took place on March 5, 2019. On March 19, 2019, the Korea Tax Tribunal issued its ruling in which it decided not to accept our arguments with respect to the Korean tax authorities’ assessment of withholding tax and penalties imposed on LGE. On behalf of LGE, we filed an appeal with the Korea Administrative Court on June 10, 2019. We have had numerous hearings before the Korea Administrative Court in the years 2019 through 2022. We had a hearing on April 27, 2023, and the Korea Administrative Court rendered a decision on this matter on June 8, 2023, in which it ruled that the withholding taxes and penalties which were imposed by the Korean tax authorities on LGE should be cancelled with litigation costs to be borne by the Korean tax authorities. In connection with the Korea Administrative Court’s decision, the Korean tax authorities filed an appeal on June 28, 2023 with the Seoul High Court to seek the cancellation of the lower court’s decision. The appellate case is in progress at the Seoul High Court and the first and the second hearings were taken place on November 30, 2023 and February 1, 2024, respectively. However, the next hearing will be set at a later date.

On April 25, 2023, we received notice from LGE requesting us to reimburse LGE with respect to withholding tax imposed on LGE by the Korean tax authorities following a recent tax audit of LGE for the years 2018 through 2022. Pursuant to an agreement reached with LGE, on June 2, 2023, we provided a provisional deposit to LGE in the amount of KRW 3,024,877,044 (approximately $2.3 million) representing the amount of such withholding tax that was imposed on LGE, which provisional deposit would be returned to us to the extent we ultimately prevail in the appeal in the Korean courts. In the second quarter of 2023, we recorded this deposit in Long-term deposits on our Condensed Consolidated Balance Sheets. On June 29, 2023, on behalf of LGE, we filed an appeal with the Korea Tax Tribunal regarding their findings with respect to the withholding taxes related to the 2018 to 2022 period. On August 7, 2023, the Korean tax authority submitted its answer against the tax appeal. On September 8, 2023, on behalf of LGE, the Company submitted its rebuttal brief in response thereto. On September 25, 2023, Korean tax authority submitted an additional response brief, and on November 23, 2023, the Korea Tax Tribunal rendered a decision against LGE, dismissing the claims of the Company on the grounds that its claims are without merit. In response thereto, on behalf of LGE, we filed an appeal with the Korea Administrative Court on December 29, 2023. The first hearing date has not yet been set. As of December 31, 2023, we have accrued $0.3 million of withholding taxes, interest and penalties related to the 2018 to 2022 period for which the Korean tax authorities have assessed LGE. These withholding taxes had been reclassified and reported as an impairment reduction to the Long-term deposit made in the second quarter of 2023 in order to present the deposit at its estimated recoverable value.

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

Samsung Electronics Co. v. Immersion Corporation and Immersion Software Ireland Limited

On April 28, 2017, Immersion and Immersion Software Ireland Limited (collectively referred to as “Immersion” in this section) received a letter from Samsung Electronics Co. (“Samsung”) requesting that Immersion reimburse Samsung with respect to withholding tax and penalties imposed on Samsung by the Korean tax authorities following an investigation where the tax authority determined that Samsung failed to withhold taxes on Samsung’s royalty payments to Immersion Software Ireland from 2012 to 2016. The Company was engaged in legal proceedings related to Samsung from 2017 through 2022. In March 2022, as a result of a decision by the Korea Supreme Court, we were reimbursed by Samsung in an amount equal to KRW 6,088,855,388 (approximately $5 million) representing Korea national-level taxes, penalties and interest that were canceled by the Korea Supreme Court, which amount is net of $1.3 million of the impairment charge previously recorded in the fourth quarter of 2021.

Immersion Corporation vs. Meta Platforms, Inc., f/k/a Facebook, Inc.

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

The complaint against Meta asserts infringement of the following patents:

• U.S. Patent No.8,469,806: “System and method for providing complex haptic stimulation during input of control gestures, and relating to control of virtual equipment”

• U.S. Patent No.8,896,524: “Context-dependent haptic confirmation system”

• U.S. Patent No.9,727,217: “Haptically enhanced interactivity with interactive content”

• U.S. Patent No.10,248,298: “Haptically enhanced interactivity with interactive content”

• U.S. Patent No.10,269,222: “System with wearable device and haptic output device”

• U.S. Patent No.10,664,143: “Haptically enhanced interactivity with interactive content”

Meta responded to the Company’s complaint on August 1, 2022. On September 12, 2022, Meta filed a motion to transfer the lawsuit to the Northern District of California or, in the alternative, to the Austin Division of the Western District of Texas. The Court denied Meta’s motion on May 30, 2023, and held the claim construction hearing on the same day. The Court adopted certain claim constructions during the hearing and issued a formal claim construction order consistent with those constructions on July 7, 2023. On August 2, 2023, Meta filed a mandamus petition asking the Federal Circuit to reverse the district court’s order on Meta’s transfer motion. Fact discovery closed on October 6, 2023. The Federal Circuit denied Meta’s mandamus petition on October 30, 2023.

On November 10, 2023, Immersion filed a separate action in the Western District of Texas against Meta directed to its newly launched Quest 3 product, asserting the following patents:

• U.S. Patent No.8,469,806: “System and method for providing complex haptic stimulation during input of control gestures, and relating to control of virtual equipment”

• U.S. Patent No.9,727,217: “Haptically enhanced interactivity with interactive content”

• U.S. Patent No.10,248,298: “Haptically enhanced interactivity with interactive content”

• U.S. Patent No.10,269,222: “System with wearable device and haptic output device”

• U.S. Patent No.10,664,143: “Haptically enhanced interactivity with interactive content”

In addition, Meta filed inter partes reviews (“IPRs”), IPR 2023-00942; IPR 2023-00943; and IPR 2023-00944 on May 25, 2023. These are directed to U.S. Patent Nos.8,469,806;8,896,524; and 10,269,222, respectively. The Company filed its response to IPR 2023-00942 and IPR 2023-0094 on September 8, 2023, and to IPR 2023-00944 on September 12, 2023. Meta filed IPR 2023-00945; IPR 2023-00946; and IPR 2023-00947 on May 26, 2023. These IPRs are directed to United States Patent Nos.10,664,143;9,727,217; and 10,248,298, respectively. The Patent Trial and Appeal Board instituted review of IPR 2023-00942 on December 6, 2023; IPR 2023-00943 on December 6, 2023; IPR 2023-00944 on December 7, 2023; IPR 2023-00945 on December 6, 2023; IPR 2023-00946 on December 8, 2023; and IPR 2023-00947 on December 6, 2023.

On January 16, 2024, Immersion and Meta jointly moved to stay all deadlines in district court because they had arrived at a settlement in principle. On January 17, 2024, the Court stayed all deadlines. Under the Court’s order, the parties were to either move to dismiss the proceedings if they finalized the settlement agreement, or alternatively they were to provide the Court with a status update, by January 31, 2024. On February 9, 2024, we finalized a settlement agreement that resolved all district court and PTAB disputes. See Note 12. Subsequent Event in the Notes to Consolidated Financial Statements for further information.

Immersion Corporation vs. Xiaomi Group

On or about March 3, 2023, we initiated patent infringement lawsuits against several companies of the Xiaomi-Group (the “Xiaomi-Group”) in Germany, France and India. We initiated lawsuits against Xiaomi-Group companies and their agents in the Düsseldorf Regional Court in Germany, theTribunal judiciaire de Paris (Paris First Instance Civil Court) in France, and the High Court of Delhi, at New Delhi, in India.

The complaints allege that the Xiaomi-Group’s devices, including the Xiaomi 12, infringe our patents that cover various uses of haptic effects in connection with such devices. We are seeking injunctions that would allow us to prohibit Xiaomi-Group from selling the infringing devices in Germany, France and India, as well as costs and damages as compensation for such infringement.

The complaints against the Xiaomi-Group assert infringement of the following patents:

• EP 2 463 752 B 1 (German part) titled “Haptisches Feedback-System mit gespeicherten Effekten”

• EP 2 463 752 B 1 (French part) titled “Système de rendu haptique avec stockage d’effets”

• IN 304 396 (India) titled “Haptic Feedback System With Stored Effects”

On June 19, 2023, Xiaomi filed an initial response to the Company’s lawsuit in India. On July 7, 2023, the Indian litigation was listed before the Learned Joint Registrar (“JR”), Mr. Siddharth Mathur. The application seeking interim injunction will be heard on March 21, 2024.

On July 11, 2023, in the German proceeding Xiaomi filed its nullity action in the German Federal Patent Court, which was served on Immersion on July 27, 2023. Immersion replied on October 27, 2023, and is awaiting Xiaomi’s response which is anticipated to be filed in late January or early February 2024, with a decision expected in March or April of 2024. In the German infringement proceeding, Xiaomi’s statement of defense was due on October 25, 2023. Immersion’s reply was due on February 26, 2024. Xiaomi’s rejoinder is scheduled for July 25, 2024. The oral hearing is scheduled for August 29, 2024.

Xiaomi had until December 21, 2023 to reply to Immersion’s writ of summons in the French proceeding. Xiaomi requested an extension, and replied on January 4, 2024. Immersion’s tentative deadline to respond is March 14, 2024. The next case management hearing is scheduled for March 21, 2024.

Immersion Corporation vs. Valve Corporation

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

The complaint against Valve asserts infringement of the following patents:

• U.S. Patent No.7,336,260: “Method and Apparatus for Providing Tactile Sensations”

• U.S. Patent No.8,749,507: “Systems and Methods for Adaptive Interpretation of Input from a Touch-Sensitive Input Device”

• U.S. Patent No.9,430,042: “Virtual Detents Through Vibrotactile Feedback”

• U.S. Patent No.9,116,546: “System for Haptically Representing Sensor Input”

• U.S. Patent No.10,627,907: “Position Control of a User Input Element Associated With a Haptic Output Device”

• U.S. Patent No.10,665,067: “Systems and Methods for Integrating Haptics Overlay in Augmented Reality”

• U.S. Patent No.11,175,738: “Systems and Methods for Proximity-Based Haptic Feedback”

Valve responded to the Complaint on July 24, 2023 with a motion to dismiss. Valve re-noted its motion, which changed the Company’s response deadline from August 14, 2023, to August 21, 2023. The Company timely filed its response and Valve filed its reply on August 25, 2023. The motion remains pending. The Court entered a case schedule on November 21, 2023. The case schedule does not include a trial date but set the pretrial conference for May 30, 2025.

6. STOCK-BASED COMPENSATION

Stock Options and Awards

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

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

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

A summary of our equity incentive program as of December 31, 2023, is as follows (in thousands):

Time-Based Stock Options

The following summarizes activities for the time-based stock options for theyears ended December 31, 2023:

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the exercise price of our common stock for the options that were in-the-money.

Restricted Stock Units

The following summarizes RSU activities for theyear ended December 31, 2023:

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

Restricted Stock Awards

The following summarizes RSA activities for theyear ended December 31, 2023:

Market Condition-Based Restricted Stock Units

In the first quarter of 2022, we granted 600,000 shares of PSUs to certain members of our management team. Each PSU representsthe right to one share of our common stock with vesting subject to: (a) the achievement of specified levels of the volume weighted average closing prices of our common stock during any 100 day-period between January 1, 2022 and January 1, 2027, subject to certification by the Compensation Committee (“Performance Milestones”); and (b) continued employment with us through the later of each achievement date or service vesting date, which occurs over a three (3) year period commencing on January 1, 2022.

The following summarizes PSU activities for theyear ended December 31, 2023:

The assumptions used to value market condition-based restricted stock units granted during the year ended December 31, 2022 under our equity incentive program are as follows:

Employee Stock Purchase Plan

Under the 1999 Employee Stock Purchase Plan (“ESPP”), eligible employees may purchase common stock through payroll deductions at a purchase price of 85% of the lower of the fair market value of our common stock at the beginning of the offering period or the purchase date. Participants may not purchase more than 2,000 shares in asix-month offering period or purchase stock having a value greater than $25,000 in any calendar year as measured at the beginning of the offering period. A total of 1.0 million shares of common stock had been reserved for issuance under the ESPP. During theyear ended December 31, 2023, 1,298 shares were purchased under the ESPP. Effective February 1, 2023, our ESPP was discontinued, and 193,134 shares expired following the ESPP termination.

Stock-based Compensation Expense

Valuation and amortization methods

Stock-based compensation is based on the estimated fair value of awards, net of estimated forfeitures, and recognized over the requisite service period. Estimated forfeitures are based on historical experience at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The stock-based compensation related to all of our stock-based awards and ESPP for theyear ended December 31, 2023 and 2022 is as follows (in thousands):

As of December 31, 2023, there was $4.4 million of unrecognized compensation cost adjusted for estimated forfeitures related to non-vested stock options, RSUs, RSAs and PSUs granted to our employees and directors. This unrecognized compensation cost will be recognized over an estimated weighted-average period ofapproximately 2.0 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.

7. STOCKHOLDERS’ EQUITY

Stock Repurchase Agreement

On February 14, 2022, we entered into a Common Stock Repurchase Agreement (the “Agreement”) with Invenomic Capital Management LP. (“Invenomic”). Pursuant to the Agreement, we purchased 904,499 shares of our common stock from Invenomic at $4.725 per share, or an aggregate purchase price of $4.3 million. The closing price of our common stock on February 14, 2022 was $4.80 per share.

We adopted a Section 382 Tax Benefits Preservation Plan on November 17, 2021 to diminish the risk we could experience an “ownership change” as defined in Section 382 of the Internal Revenue Code of 1986, as amended, which could substantially limit or permanently eliminate our ability to utilize its net operating loss carryovers to reduce potential future income tax obligations. Under this plan, a person who acquires, without the approval of our Board of Directors(the "Board"), beneficial ownership of 4.99% or more of the outstanding common stock could be subject to significant dilution. Following the repurchase, Invenomic’s holdings dropped to below 4.99% of the outstanding common stock.

Stock Repurchase Program

On February 23, 2022, our Board approved a stock repurchase program of up to $30.0 million of our common stock for a period of up totwelve months (the "February 2022 Stock Repurchase Program"). Any stock repurchases may be made through open market and privately negotiated transactions, at such times and in such amounts as management deems appropriate, including pursuant toone or more Rule 10 b 5-1 trading plans adopted in accordance with Rule 10 b 5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Additionally, the Board authorized the use of any derivative or similar instrument to effect stock repurchase transactions, including without limitation, accelerated share repurchase contracts, equity forward transactions, equity option transactions, equity swap transactions, cap transactions, collar transactions, naked put options, floor transactions or other similar transactions or any combination of the foregoing transactions. The February 2022 Stock Repurchase Program was implemented as a method to return value to our stockholders. The timing, pricing and sizes of any repurchases will depend on a number of factors, including the market price of our common stock and general market and economic conditions. The February 2022 Stock Repurchase Program does not obligate us to repurchase any dollar amount or number of shares, and the program may be suspended or discontinued at any time.

In the year ended December 31, 2022 we repurchased 1,637,566 shares of our common stock for $8.9 million at an average purchase price of $5.46 per share. The February 2022 Stock Repurchase Program was terminated on December 29, 2022.

On December 29, 2022, the Board approved a stock repurchase program of up to $50.0 million of our common stock for a period of up totwelve months (the “December 2022 Stock Repurchase Program”), which terminated and superseded the February 2022 Stock Repurchase Plan that had been approved by the Board on February 23, 2022. Any stock repurchases may be made through open market and privately negotiated transactions, at such times and in such amounts as management deems appropriate, including pursuant toone or more Rule 10 b 5-1 trading plans adopted in accordance with Rule 10 b 5-1 of the Exchange Act. Additionally, the Board authorized the use of any derivative or similar instrument to effect stock repurchase transactions, including without limitation, accelerated share repurchase contracts, equity forward transactions, equity option transactions, equity swap transactions, cap transactions, collar transactions, naked put options, floor transactions or other similar transactions or any combination of the foregoing transactions. The December 2022 Stock Repurchase Program was implemented as a method to return value to our stockholders. The timing, pricing and sizes of any repurchases will depend on a number of factors, including the market price of our common stock and general market and economic conditions. The December 2022 Stock Repurchase Program does not obligate us to repurchase any dollar amount or number of shares, and the program may be suspended or discontinued at any time. On August 8, 2023, the Board approved an amendment to extend the expiration date of the December 2022 Stock Repurchase Program that was set to expire on December 29, 2023 to December 29, 2024.

In the year ended December 31, 2023 we repurchased 1,217,774 shares of our common stock for $8.3 million at an average purchase price of $6.77 per share. As of December 31, 2023 we have $41.7 million available for repurchase under the December 2022 Stock Repurchase Program.

Dividends Payment

On November 14, 2022, our Board declared a quarterly dividend in the amount of $0.03 per share, which was paid on January 30, 2023, to stockholders of record on January 15, 2023. In addition, on December 29, 2022, our Board declared a special dividend in the amount of $0.10 per share, which was paid on January 30, 2023 to stockholders of record on January 15, 2023.

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

On March 7, 2024, our Board declared a quarterly dividend in the amount of$0.045 per share, will be payable on April 19, 2024 to shareholders of record on April 12, 2024.

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

In the year ended December 31,2023, the total dividends paid was $7.4 million.

8. INCOME TAXES

Benefit from (provision for) income taxes theyears ended December 31, 2023 and 2022 consisted of the following (in thousands):

Provision for income taxes for theyear ended December 31, 2023 resulted primarily from estimated domestic and foreign taxes included in the calculation of the effective tax rate. Benefit from income taxes for the year ended December 31, 2022, resulted primarily from estimated domestic and foreign taxes included in the calculation of the effective tax rate. We provided no valuation allowance for federal assets and continue to maintain full valuation allowance for state and certain foreign deferred tax assets in the United States and Canada.

The components of our income before benefit from (provision for) income taxes were as follows (in thousands):

The benefit from (provision for) income taxes consisted of the following (in thousands):

Deferred tax assets and liabilities are recognized for the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, tax losses, and credit carryforwards.

Significant components of the net deferred tax assets and liabilities consisted of (in thousands):

We account for deferred taxes under ASC 740 which requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance if, based on available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on the ASC 740 more-likely-than-not realization (“MLTN”) threshold criterion. This assessment considers matters such as future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The evaluation of the recoverability of the deferred tax assets requires that we weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax assets will not be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. As of December 31, 2023, based on our assessment of the realizability of our deferred tax assets, we provided no valuation allowance for certain federal assets, whose future realization is more likely than not and continue to maintain full valuation allowance for state and certain foreign deferred tax assets in the United States and Canada, whose future realization is not more likely than not to be realized. As of December 31, 2022, based on our assessment of the realizability of our deferred tax assets, we put partial valuation allowance for certain federal assets, whose future realization is not more likely than not and continue to maintain full valuation allowance for state and certain foreign deferred tax assets in the United States and Canada.

As of December 31, 2023 the net operating loss carryforwards for state income tax purposes were approximately $53.0 million, respectively. The state net operating losses begin to expire in 2029. The federal net operating losses for tax years after 2017 can be carried forward indefinitely. We haveno net operating loss carryforward from foreign jurisdictions. As of December 31, 2023 we had federal and state tax credit carryforwards of approximately $2.0 million and $2.5 million, respectively, available to offset future tax liabilities. The federal credit carryforwards will expire between 2023 and 2039 and the California tax credits will carryforward indefinitely. In addition, as of December 31, 2023 we have Canadian research and development credit carryforwards of $1.7 million, which will expire at various dates through 2040. These operating losses and credit carryforwards have not been reviewed by the relevant tax authorities and could be subject to adjustment upon examinations.

Section 382 of the Internal Revenue Code (“IRC Section 382”) imposes limitations on a corporation’s ability to utilize its net operating losses and credit carryforwards if it experiences an “ownership change” as defined by IRC Section 382. Utilization of a portion of our federal net operating loss carryforward was limited in accordance with IRC Section 382, due to an ownership change that occurred during 1999. This limitation has fully lapsed as of December 31, 2010.

The reconciliation of federal statutory income tax rate to our effective tax rate was as follows (in thousands):

The undistributed earnings of our foreign subsidiaries are considered to be indefinitely reinvested and accordingly, no provision for applicable income taxes has been provided thereon. Upon distribution of those earnings, we are subject to withholding taxes payable to various foreign countries. As of December 31, 2023, any foreign withholding taxes on the undistributed earnings of our foreign subsidiaries were immaterial.

We maintain liabilities for uncertain tax positions. These liabilities involve considerable judgment and estimation and are continuously monitored by management based on the best information available, including changes in tax regulations, the outcome of relevant court cases, and other information.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):

The unrecognized tax benefits relate primarily to federal and state research and development credits, intercompany profit on the transfer of certain IP rights toone of our foreign subsidiaries as part of our tax reorganization completed in 2015 and withholding tax reserve. Based on our assessment of the development in the Samsung case in October 2021, we continue to accrue $0.3 million liability for 2023.

We account for interest and penalties related to uncertain tax positions as a component of income tax expense. As of December 31, 2022, we accrued $0.2 million interest or penalties related to uncertain tax positions. As of December 31, 2023, the total amount of unrecognized tax benefits that would affect our effective tax rate, if recognized, was $4.9 million.

Because we have net operating loss and credit carryforwards, there are open statutes of limitations in which federal, state and foreign taxing authorities may examine our tax returns for all years from 2008 through the current period.

9. NET INCOME (LOSS) PER SHARE

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

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

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

For the year ended December 31, 2023, we hadno outstanding stock options and awards that could potentially dilute basic earnings per share in the future. For theyear ended December 31, 2022, we had 0.2 million outstanding stock options and 25,000 outstanding awards that could potentially dilute basic earnings per share in the future, but these were excluded from the computation of diluted net income per share because their effect would have been anti-dilutive.

10. LEASES

We lease our office space under lease arrangements with expiration dates on or before March 31, 2024. We recognize lease expense on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets. We combine lease and non-lease components for new and reassessed leases. We apply discount rates to operating leases using a portfolio approach.

Below is a summary of our right-of-use(“ROU”) assets and lease liabilities (in thousands):

The table below provides supplemental information related to operating leases during theyears ended December 31, 2023 and 2022 (in thousands except for lease term):

On June 6, 2022, we entered into a sublease agreement with Innovobot Fund LLP (“Innovobot”) for our facility located in Montreal Canada (the "Montreal Facility"). This sublease commenced on June 8, 2022 and ended on February 27, 2024 which approximates the lease termination date of the original Montreal Facility lease. In accordance with provisions of ASC 842, we treated the sublease as a separate lease as we were not relieved of the primary obligation under the original lease. We continue to account for the original Montreal Facility, as a lessee, in the same manner as prior to the commencement date of the sublease. We accounted for the sublease as a lessor of the lease. We classified the sublease as an operating lease as it did not meet the criteria of a Sale-Type or Direct Financing lease. At the commencement date of the sublease, we recognized initial direct costs of $23,000. These deferred costs will be amortized over the term of the sublease payments. Both the Montreal Facility and the sublease ended in February 2024.

On January 31, 2022, we entered into an agreement to lease a 1,390 square feet of office space in Aventura, Florida (“Aventura Lease”). We use this facility as our principal executive offices and for general administrative functions. This lease commenced in the first quarter of 2022 and expires in the first quarter of 2024. We accounted for this lease as an operating lease in accordance with the provisions of ASC 842 Leases(“ASC 842”). In the first quarter of 2022, we recorded a lease liability of $0.1 million, which represents the present value of the lease payments using an estimated incremental borrowing rate of 3.93%. We also recognized a ROU asset of $0.1 million which represents our right to use an underlying asset for the lease term.

On March 12, 2020, we entered into a sublease agreement with Neato Robotics, Inc. (“Neato”) for our facility located in San Jose, California (the“San Jose Lease”). This sublease commenced in June 2020 and ended on April 30, 2023 which is the lease termination date of the original San Jose Facility lease. In accordance with provisions of ASC 842, we treated the sublease as a separate lease as we were not relieved of the primary obligation under the original lease. We continue to account for the original San Jose Facility, as a lessee, in the same manner as prior to the commencement date of the sublease. We accounted for the sublease as a lessor of the lease. We classified the sublease as an operating lease as it did not meet the criteria of a Sale-Type or Direct Financing lease. At the commencement date of the sublease, we recognized initial direct costs of $0.3 million were amortized over the term of the sublease. Both the San Jose Facility lease and the sublease ended in April 2023.

We recognize operating lease expense and lease payments from the sublease, on a straight-line basis, in our Consolidated Statements of Income and Comprehensive Income over the lease terms.

During theyear ended December 31, 2023 and 2022 our net operating lease expenses are as follows (in thousands):

Minimum future lease payments obligations as of December 31, 2023 are as follows (in thousands):

Future cash receipts from our sublease agreements as of December 31, 2023 are as follows (in thousands):

11. SEGMENT REPORTING, GEOGRAPHIC INFORMATION, AND SIGNIFICANT CUSTOMERS

Segment Information

We develop, license, and support a wide range of software and IP that more fully engage users’ senses of touch when operating digital devices. We focus on the following target application areas: mobile devices, wearables, consumer, mobile entertainment and other content; console gaming; automotive; medical; and commercial. We manage these application areas inone operating and reporting segment with onlyone set of management, development, and administrative personnel.

Our CODM is the Chief Executive Officer. The CODM approves budgets and allocates resources to and assesses our business performance using information about our revenue and operating loss. There is onlyone segment that is reported to management.

Revenue by Market Area

The following is a summary of revenues by market areas. Revenue as a percentage of total revenues by market are as follows:

Geographic Revenue

Revenues are broken out geographically by the location of the customer. A summary of revenue by region as a percentage of total revenues are as follows:

A summary of revenue by country as a percentage of total revenues are as follows:

Property and Equipment, net by Country

Property and equipment, net by geographic areas as a percentage of total property and equipment, net are as follows:

Significant Customers

During the year ended December 31, 2023, three customers accounted for 31%,23% and 14% of our total revenue, respectively. In 2022, three customers accounted for 31%,18% and 13% of our total revenues, respectively.

A summary of customers with 10% or greater of our outstanding accounts and other receivables are as follows:

*Represents less than 10% of our total accounts and other receivables.

12. SUBSEQUENT EVENTS

On February 9, 2024, we entered into a Patent License and Settlement Agreement (the “License and Settlement Agreement”) with Meta, pursuant to which the parties have agreed to terms for resolving the litigation matters against Meta described inNote 5 Contingencies (the “Litigation”) and Meta will license, on a non-exclusive basis, Immersion’s patent portfolio for use in its products. Under the License and Settlement Agreement, in consideration for the license and releases granted therein, Immersion expects to receive approximately $17.5 million, after deducting for legal fees related to the Litigation (and other pending litigation) and other liabilities. Pursuant to the License and Settlement Agreement, Immersion and Meta have agreed to terms for dismissal by them of the outstanding Litigation and IPRs. The description of the License and Settlement Agreement contained herein does not purport to be complete and is qualified in its entirety by reference to the License and Settlement Agreement, which we intend to file as an exhibit to our Quarterly Report on Form 10-Q for the quarter ending March 31, 2024.