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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2022

or

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

For the transition period from               to                                

Commission File Number 000-38334

Immersion Corporation

(Exact name of registrant as specified in its charter)

Delaware						94-3180138
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

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

(Address of principal executive offices, zip code)

(408) 467-1900

(Registrant’s telephone number, including area code)

Not Applicable

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

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

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

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

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

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

Large accelerated filer

[ ]

Accelerated filer

[ ]

Non-accelerated filer

[X ]

Smaller reporting company

[X ]

Emerging Growth Company

[ ]

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

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

Number of shares of common stock outstanding at November 4, 2022 was 32,308,895.

IMMERSION CORPORATION

TABLE OF CONTENTS

PART I						Page
FINANCIAL INFORMATION
Item 1.			Financial Statements			2
			Unaudited Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021			2
			Unaudited Condensed Consolidated Statements of Income and Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021			3
			Unaudited Condensed Consolidated Statements of Stockholders' Equity for the Three Months Ended September 30, 2022 and 2021			4
			Unaudited Condensed Consolidated Statements of Stockholders' Equity for the Nine Months Ended September 30, 2022 and 2021			0
			Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021			6
			Unaudited Notes to Condensed Consolidated Financial Statements			8
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
Item 4.			Controls and Procedures			36
PART II
OTHER INFORMATION
Item 1.			Legal Proceedings			37
Item 1A.			Risk Factors			39
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			39
Item 6.			Exhibits			41
Signatures						42

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Table of Contents

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

IMMERSION CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

			September 30, 2022						December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents			$	36,767					$	51,490
Investments - current			96,779						86,431
Accounts and other receivables			3,343						1,970
Prepaid expenses and other current assets			7,731						13,432
Total current assets			144,620						153,323
Property and equipment, net			362						444
Investments - noncurrent			18,520						7,286
Long-term deposits			4,425						9,658
Other assets			3,290						4,809
Total assets			$	171,217					$	175,520
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable			$	14					$	2
Accrued compensation			1,270						555
Deferred revenue - current			4,763						4,826
Other current liabilities			7,729						11,247
Total current liabilities			13,776						16,630
Deferred revenue - noncurrent			13,808						16,699
Other long-term liabilities			479						896
Total liabilities			28,063						34,225
Commitments and contingencies (Note 5)
Stockholders’ equity:
Common stock and additional paid-in capital			326,097						323,296
Accumulated other comprehensive income (loss)			(57)						412
Accumulated deficit			(89,718)						(100,680)
Treasury stock			(93,168)						(81,733)
Total stockholders’ equity			143,154						141,295
Total liabilities and stockholders’ equity			$	171,217					$	175,520

See accompanying Notes to Condensed Consolidated Financial Statements.

2

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Table of Contents

IMMERSION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(In thousands, except per share amounts)

(Unaudited)

 

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Revenues:
Royalty and license			$	13,931					$	7,068					$	29,079					$	25,017
Development, services, and other			75						105						218						325
Total revenues			14,006						7,173						29,297						25,342
Costs and expenses:
Cost of revenues			—						8						4						78
Sales and marketing			282						443						986						2,743
Research and development			254						803						1,118						3,442
General and administrative			2,540						2,246						8,550						7,106
Total costs and expenses			3,076						3,500						10,658						13,369
Operating income			10,930						3,673						18,639						11,973
Interest and other income (loss), net			(2,348)						438						(6,413)						162
Income before provision for income taxes			8,582						4,111						12,226						12,135
Provision for income taxes			(877)						(340)						(1,264)						(987)
Net income			$	7,705					$	3,771					$	10,962					$	11,148
Basic net income per share			$	0.23					$	0.12					$	0.33					$	0.36
Shares used in calculating basic net income per share			33,201						32,474						33,601						30,693
Diluted net income per share			$	0.23					$	0.12					$	0.32					$	0.36
Shares used in calculating diluted net income per share			33,682						32,612						34,035						31,065
Other comprehensive income, net of tax
Change in unrealized gains (losses) on available-for-sale securities			$	344					$	531					$	(469)					$	531
Total comprehensive income			$	8,049					$	4,302					$	10,493					$	11,679

See accompanying Notes to Condensed Consolidated Financial Statements.

3

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Table of Contents

IMMERSION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except number of shares)

(Unaudited)

			Three Months Ended September 30, 2022
			Common Stock and Additional Paid-In Capital												Accumulated Other Comprehensive Income (Loss)						Accumulated Deficit						Treasury Stock												Total Stockholders’ Equity
			Shares						Amount																		Shares						Amount
Balances at June 30, 2022			46,851,509						$	325,351					$	(401)					$	(97,423)					13,378,528						$	(87,790)					$	139,737
Net income			—						—						—						7,705						—						—						7,705
Unrealized gain on available-for-sale securities, net of taxes			—						—						344						—						—						—						344
Stock repurchases			—						—						—						—						954,247						(5,304)						(5,304)
Release of restricted stock units and awards, net of shares withheld			51,875						—						—						—						13,768						(74)						(74)
Issuance of stock for ESPP purchase			3,691						16						—						—						—						—						16
Stock-based compensation			—						730						—						—						—						—						730
Balances at September 30, 2022			46,907,075						326,097						$	(57)					$	(89,718)					14,346,543						$	(93,168)					$	143,154

			Three Months Ended September 30, 2021
			Common Stock and Additional Paid-In Capital												Accumulated Other Comprehensive Income						Accumulated Deficit						Treasury Stock												Total Stockholders’ Equity
			Shares						Amount																		Shares						Amount
Balances at June 30, 2021			43,252,670						$	299,124					$	122					$	(105,787)					12,143,433						$	(81,733)					$	111,726
Net income			—						—						—						3,771						—						—						3,771
Unrealized gain on available-for-sale securities, net of taxes			—						—						531						—						—						—						531
Issuance of stock for ESPP purchase			9,490						61						—						—						—						—						61
Release of restricted stock units and awards			8,407						—						—						—						—						—						—
Shares issued in connection with public offering, net of issuance costs			1,897,326						14,285						—						—						—						—						14,285
Stock-based compensation			—						415						—						—						—						—						415
Balances at September 30, 2021			45,167,893						$	313,885					$	653					$	(102,016)					12,143,433						$	(81,733)					$	130,789

See accompanying Notes to Condensed Consolidated Financial Statements.

4

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IMMERSION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except number of shares)

(Unaudited)

			Nine Months Ended September 30, 2022
			Common Stock and Additional Paid-In Capital												Accumulated Other Comprehensive Income (Loss)						Accumulated Deficit						Treasury Stock												Total Stockholders’ Equity
			Shares						Amount																		Shares						Amount
Balances at December 31, 2021			46,534,198						$	323,296					$	412					$	(100,680)					12,143,433						$	(81,733)					$	141,295
Net income																					10,962																		10,962
Unrealized loss on available-for-sale securities, net of taxes			—						—						(469)						—						—						—						(469)
Stock repurchases																											2,174,793						(11,281)						(11,281)
Issuance of stock for ESPP purchase			11,416						51						—						—												—						51
Release of restricted stock units and awards, net of shares withheld for employee taxes			344,944						—						—						—						28,317						(154)						(154)
Shares issued to an employee in lieu of cash compensation			16,517						84						—						—						—						—						84
Shares issued in connection with public offering, net of issuance costs			—						5						—						—						—						—						5
Stock-based compensation									2,661						—						—						—						—						2,661
Balances at September 30, 2022			46,907,075						$	326,097					$	(57)					$	(89,718)					14,346,543						$	(93,168)					143,154

			Nine Months Ended September 30, 2021
			Common Stock and Additional Paid-In Capital												Accumulated Other Comprehensive Income						Accumulated Deficit						Treasury Stock												Total Stockholders’ Equity
			Shares						Amount																		Shares						Amount
Balances at December 31, 2020			39,161,214						$	258,756					$	122					$	(113,164)					12,143,433						$	(81,733)					$	63,981
Net income			—						—						—						11,148						—						—						11,148
Unrealized gain on available-for-sale securities			—						—						531						—						—						—						531
Exercise of stock options, net of shares withheld for employee taxes			325,737						2,864						—						—						—						—						2,864
Issuance of stock for ESPP purchase			25,033						150						—						—						—						—						150
Release of restricted stock units and awards			448,772						—						—						—						—						—						—
Shares issued in connection with public offering, net of issuance costs			5,207,137						50,118						—						—						—						—						50,118
Stock-based compensation			—						1,997						—						—						—						—						1,997
Balances at September 30, 2021			45,167,893						$	313,885					$	653					$	(102,016)					12,143,433						$	(81,733)					130,789

See accompanying Notes to Condensed Consolidated Financial Statements.

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IMMERSION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

			Nine Months Ended September 30,
			2022						2021
Cash flows provided by (used in) operating activities:
Net income			$	10,962					$	11,148
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
Depreciation of property and equipment			95						75
Reduction in carrying value of right of use assets			524						500
Stock-based compensation			2,661						1,997
Net (gain) loss on investment in marketable securities			13,288						(490)
Net (gain) on derivative instruments			(3,393)						—
Foreign currency remeasurement losses			161						612
Shares issued to an employee in lieu of cash compensation			84						—
Shares withheld to cover payroll taxes			(154)						—
Other			(29)						68
Changes in operating assets and liabilities:
Accounts and other receivables			(1,373)						(1,953)
Prepaid expenses and other current assets			5,702						870
Long-term deposits			1,114						33
Other assets			5,084						2,097
Accounts payable			16						(30)
Accrued compensation			715						(272)
Other current liabilities			527						917
Deferred revenue			(2,954)						(3,734)
Other long-term liabilities			(950)						(1,116)
Net cash and cash equivalents provided by operating activities			32,080						10,722
Cash flows provided by (used in) investing activities:
Purchases of marketable securities and other investments			(131,100)						(34,443)
Proceeds from sale or maturities of marketable securities and other investments			95,225						—
Proceeds from sale of derivative instruments			11,170						1,757
Payments for settlement of derivative instruments			(10,844)						—
Purchases of property and equipment			(29)						(89)
Net cash and cash equivalents used in investing activities			(35,578)						(32,775)
Cash flows provided by (used in) financing activities:
Payment for purchases of treasury stock			(11,281)						—
Proceeds from issuance of common stock, net of issuance costs			5						50,118
Proceeds from issuance of common stock under employee stock purchase plan			51						150
Proceeds from stock options exercises			—						2,864
Net cash and cash equivalents provided by (used in) financing activities			(11,225)						53,132
Net increase (decrease) in cash and cash equivalents			(14,723)						31,079
Cash and cash equivalents:
Beginning of period			51,490						59,522
End of period			$	36,767					$	90,601

See accompanying Notes to Condensed Consolidated Financial Statements.

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IMMERSION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

			Nine Months Ended September 30,
			2022						2021
Supplemental disclosure of cash flow information:
Cash paid for income taxes			$	662					$	88
Supplemental disclosure of non-cash investing, and financing activities:
Release of restricted stock units and awards under company stock plan			$	1,836					$	4,081
Leased assets obtained in exchange for new operating lease liabilities			$	120					$	—

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.   SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Immersion Corporation (the "Company", "Immersion", "we" or "us") was incorporated in 1993 in California and reincorporated in Delaware in 1999. We 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 have adopted a business model under which it provides advanced tactile software, related tools, technical assistance designed to help integrate our patented technology into our customers’ products or enhance the functionality of our patented technology to certain customers, and offers licenses to our patented technology to other customers.

Impact of COVID-19

The outbreak of a novel strain of coronavirus ("COVID-19") caused governments and public health officials around the world to implementing stringent measures to help control the spread of the virus. In response to the COVID-19 pandemic, we implemented work-from-home and restricted travel policies in the first quarter of 2020, but have since lifted our travel restriction and our employees now work both from the office and from home.

In April 2020, the Government of Canada announced the Canada Emergency Wage Subsidy (“CEWS”) for Canadian employers whose businesses were affected by the COVID-19 pandemic. The CEWS provides a subsidy of up to 75% of eligible employees’ employment insurable remuneration, subject to certain criteria. We applied for the CEWS to the extent we met the requirements to receive the subsidy. During the nine months ended September 30, 2021 we recognized $0.3 million in government subsidies as a reduction to operating expenses in the Condensed Consolidated Statements of Income and Comprehensive Income. We did not recognize for any government subsidy during the nine months ended September 30, 2022.

Principles of Consolidation and Basis of Presentation

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

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all information and footnotes necessary for a complete presentation of the financial position, results of operations, and cash flows, in conformity with U.S. GAAP and should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021. In the opinion of management, all adjustments consisting of only normal and recurring items necessary for the fair presentation of the financial position and results of operations for the interim periods presented have been included. Certain prior year amounts have been reclassified to conform with the current year presentation.

Use of Estimates

The preparation of condensed consolidated financial statements and related disclosures requires management to make estimates and assumptions that affect the reported amounts of the condensed consolidated financial statements. Significant estimates include revenue recognition, fair value of financial instruments, useful lives of property and equipment, valuation of income taxes including uncertain tax provisions, stock-based compensation and long-term deposits for withholding taxes. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full year.

Segment Information

We develop, license, and support a wide range of software and IP that more fully engage users’ sense of touch when operating digital devices. We focus on the following target application areas: mobile devices, wearables, consumer, mobile

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entertainment and other content; console gaming; automotive; medical; and commercial. We manage these application areas in one operating and reporting segment with only one set of management, development, and administrative personnel.

Our chief operating decision maker (“CODM”) is the Chief Executive Officer. The CODM approves budgets and allocates resources to and assesses the performance of our business using information about our revenue and operating loss. There is only one segment that is reported to management.

Certificates of Deposit

Certificate of deposits are reported at fair value on the Condensed Consolidated Balance Sheets based on their initial and remaining maturity days.

Initial or Remaining Maturity Days						Balance Sheets Classification
90 days or less						Cash and cash equivalents
Between 91 days and 1 year						Investments - current
Greater than 1 year						Investments - noncurrent

Recently Adopted Accounting Pronouncements

In November 2021, Financial Accounting Standard Board ("FASB") issued ASU 2021-10, Government Assistance (Topic 832), which requires annual disclosures that increase the transparency of transactions involving government grants, including the types of transactions, the accounting for those transactions, and the effect of those transactions on an entity’s financial statements. This new standard became effective for annual periods beginning after December 15, 2021. We adopted this new guidance in the first quarter of 2022. This adoption did not have material impact on our condensed consolidated financial statements.

2. REVENUE RECOGNITION

Disaggregated Revenue

The following table presents the disaggregation of our revenue for the three and nine months ended September 30, 2022 and 2021 (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Fixed fee license revenue			$	7,662					$	1,247					$	10,653					$	4,346
Per-unit royalty revenue			6,269						5,821						18,426						20,671
Total royalty and license revenue			13,931						7,068						29,079						25,017
Development, services, and other revenue			75						105						218						325
Total revenues			$	14,006					$	7,173					$	29,297					$	25,342

Per-unit Royalty Revenue

We record per-unit royalty revenue in the same period in which the licensee’s underlying sales occur. As we generally do not receive the per-unit licensee royalty reports for sales during a given quarter within the time frame that allows us to adequately review the reports and include the actual amounts in our quarterly results for such quarter, we accrue the related revenue based on estimates of our licensees’ underlying sales, subject to certain constraints on our ability to estimate such amounts. 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 our licensees. In the three months ended September 30,

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2022, we recorded adjustments of $0.2 million to decrease royalty revenue. We recorded adjustments of $0.5 million to decrease royalty revenue during the three months ended September 30, 2021.

Contract Assets

As of September 30, 2022, we had contract assets of $6.9 million included within Prepaid expenses and other current assets, and $0.7 million included within Other assets on the Condensed Consolidated Balance Sheets. As of December 31, 2021, we had contract assets of $12.4 million included within Prepaid expenses and other current assets, and $1.7 million included within Other assets on the Condensed Consolidated Balance Sheets.

Contract assets decreased by $6.5 million from January 1, 2022 to September 30, 2022, primarily due to actual royalties billed and the reduction in contact assets balance following our settlement agreement with Marquardt GmbH.

Contracted 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 are two separate performance obligations:

• Performance Obligation A: to transfer rights to our patent portfolio as it exists when the contract is executed.

• Performance Obligation B: to transfer rights to our patent portfolio as it evolves over the term of the contract, including access to new patent applications that the licensee can benefit from over the term of the contract.

If a fixed fee license agreement contains only Performance Obligation A, we recognize most or all of 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 the two 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. For such contracts, a contract liability account is established and included within Deferred revenue on the Condensed 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.

Based on contracts signed and payments received as of September 30, 2022, we expect to recognize $18.6 million in revenue related to Performance Obligation B under our fixed fee license agreements, which are satisfied over time, including $12.2 million over one to three years and $6.4 million over more than three years.

Total deferred revenue was $21.5 million as of December 31, 2021, of which $3.7 million was recognized during the nine months ended September 30, 2022.

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.

Our investments in marketable debt securities, including U.S. treasury securities and corporate bonds are classified and accounted for as available-for-sale. The marketable debt securities are classified either short-term or long-term based on each instrument’s underlying contractual maturity date. As of September 30, 2022 and December 31, 2021, we reported $40.6 million and $7.3 million of investments in debt securities as Investments - noncurrent on our Condensed Consolidated Balance Sheets, respectively, as management intends to hold these investment for more than 12 months from the reporting date. We may sell certain marketable debt securities prior to their stated maturities for reasons including, but not limited to, managing liquidity, credit risk, duration and asset allocation. The marketable debt securities are measured at fair value with realized gains

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and losses reported as Interest and other income (loss), net on our Condensed Consolidated Statements of Income and Comprehensive Income. Unrealized gains and losses on marketable debt securities are reported as Accumulative Other Comprehensive Income (loss) on our Statements of Stockholders' Equity.

Our investments in marketable equity securities are classified based on the nature of the securities and their availability for use in current operations. The marketable equity securities are measured at fair value with gains and losses recognized in Interest and other income (loss), net on our Condensed Consolidated Statements of Income and Comprehensive Income.

We regularly review our investment portfolio to identify and evaluate investments that have indicators of possible impairment. Investments are considered impaired when a decline in fair value is judged to be other-than-temporary. If the cost of an individual investment exceeds its fair value, we evaluate, among other factors, general market conditions, the duration and extent to which the fair value is less than cost, and our intent and ability to hold the investment. Once a decline in fair value is determined to be other-than-temporary, we will record an impairment charge and establish a new cost basis in the investment.

Marketable securities as of September 30, 2022 and December 31, 2021 consisted of following (in thousands):

			September 30, 2022
			Cost or Amortized Cost						Unrealized Gains						Unrealized Losses						Fair Value
Mutual funds			$	30,400					$	—					$	(3,265)					$	27,135
U.S. treasury securities			25,640						19						(24)						25,635
Corporate bonds			15,095						277						(457)						14,915
Equity securities			54,813						1,002						(13,468)						42,347
			$	125,948					$	1,298					$	(17,214)					$	110,032

			December 31, 2021
			Cost or Amortized Cost						Unrealized Gains						Unrealized Losses						Fair Value
Mutual funds			$	50,000					$	—					$	(338)					$	49,662
Corporate bonds			6,996						290						—						7,286
Equity securities			38,100						—						(1,331)						36,769
			$	95,096					$	290					$	(1,669)					$	93,717

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As of September 30, 2022 and December 31, 2021, marketable securities are as follows (in thousands):

						September 30, 2022
						Marketable Equity Securities						Marketable Debt Securities						Total
Mutual funds						$	27,135					$	—					$	27,135
U.S. treasury securities						—						25,635						25,635
Equity securities						42,347						—						42,347
Corporate bonds						—						14,915						14,915
						$	69,482					$	40,550					$	110,032

			December 31, 2021
			Marketable Equity Securities						Marketable Debt Securities						Total
Mutual funds			$	49,662					$	—					$	49,662
Equity securities			36,769						—						36,769
Corporate bonds			—						7,286						7,286
			$	86,431					$	7,286					$	93,717

The amortized costs and fair value of our marketable debt securities, by contractual maturity, as of September 30, 2022 (in thousands) are as follows:

			September 30, 2022
			Amortized Cost						Fair Value
Less than 1 year			$	—					$	—
1 to 5 years			35,707						35,575
More than 5 years			5,028						4,975
Total			$	40,735					$	40,550

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 and put options, the premium received is reported as Other current liabilities on our Condensed Consolidated Balance Sheets. When we purchase put or call options, the premium paid is reported as Other current liabilities on our Condensed Consolidated Balance Sheets. The carrying value of these options are adjusted to the fair value 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, on our Condensed Consolidated Statements of Income and Comprehensive Income.

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Our derivative instruments consisted of call and put options sold at their fair value as of the balance sheet date. These derivative instruments are reported as Other current liabilities on our Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 (in thousands):

			September 30, 2022
			Cost						Unrealized Losses						Fair Value
Derivative instruments			$	2,606					$	593					$	3,199
			$	2,606					$	593					$	3,199

			December 31, 2021
			Cost						Unrealized Gains						Fair Value
Derivative instruments			$	6,370					$	(103)					$	6,267
			$	6,370					$	(103)					$	6,267

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

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Net unrealized gains (losses) recognized on marketable equity securities			$	(9,278)					$	490					$	(14,062)					$	490
Net realized gains (losses) recognized on marketable equity securities			(555)						—						218						—
Net unrealized gains ( losses) recognized on derivative instruments			3,907						(2)						(696)						(2)
Net realized gains recognized on derivative instruments			2,214						9						4,089						9
Net realized gains recognized on marketable debt securities			188						—						556						—
Total net gains (losses) recognized in interest and other income (loss), net			$	(3,524)					$	497					$	(9,895)					$	497

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 September 30, 2022 and December 31, 2021.

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Financial instruments measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021 are classified based on the valuation technique in the table below (in thousands):

			September 30, 2022
			Fair Value Measurements Using
			Quoted Prices  in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)						Total
Assets:
Certificates of deposit			$	—					$	21,061					$	—					$	21,061
U.S. treasury securities			—						25,635						—						25,635
Mutual funds			27,135						—						—						27,135
Equity securities			42,347						—						—						42,347
Corporate bonds			—						14,915						—						14,915
Total assets at fair value			$	69,482					$	61,611					$	—					$	131,093
Liabilities
Derivative instruments			$	—					$	3,199					$	—					$	3,199
Total liabilities at fair value			$	—					$	3,199					$	—					$	3,199

			December 31, 2021
			Fair Value Measurements Using
			Quoted Prices  in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)						Total
Assets:
Mutual funds			$	49,662					$	—					$	—					49,662
Equity securities			36,769						—						—						36,769
Corporate bonds			—						7,286						—						7,286
Total assets at fair value			$	86,431					$	7,286					$	—					$	93,717
Liabilities
Derivative instruments			$	—					$	6,267					$	—					$	6,267
Total liabilities at fair value			$	—					$	6,267					$	—					$	6,267

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4.   BALANCE SHEETS DETAILS

Cash and Cash Equivalents

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

			September 30, 2022						December 31, 2021
Cash			$	15,567					$	51,490
Certificates of deposit (1)			15,794						—
Money market funds			5,406						—
Cash and cash equivalents			$	36,767					$	51,490

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

Investments - Current

Investments - current were as follows (in thousands):

			September 30, 2022						December 31, 2021
Certificates of deposit (2)			$	5,267					$	—
U.S. treasury securities			22,030						—
Marketable securities			69,482						86,431
Short-term investments			$	96,779					$	86,431

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

Accounts and Other Receivables

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

			September 30, 2022						December 31, 2021
Trade accounts receivables			$	2,016					$	1,235
Other receivables			1,327						735
Accounts and other receivables			$	3,343					$	1,970

Allowance for credit losses as of September 30, 2022 and December 31, 2021 were not material.

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Prepaid Expenses and Other Current Assets

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

			September 30, 2022						December 31, 2021
Prepaid expenses			$	675					$	798
Contract assets - current			6,913						12,448
Other current assets			143						186
Prepaid expenses and other current assets			$	7,731					$	13,432

Investments - noncurrent

Investments- noncurrent are as follows (in thousands):

			September 30, 2022						December 31, 2021
U.S. treasury securities			$	3,605					$	—
Marketable debt securities			14,915						7,286
Investments- noncurrent			$	18,520					$	7,286

Other Assets

Other assets are as follows (in thousands):

			September 30, 2022						December 31, 2021
Contract assets - long-term			653						1,746
Lease right-of-use assets			507						912
Deferred tax assets			2,116						2,115
Other assets			14						36
Total other assets			$	3,290					$	4,809

Other Current Liabilities

Other current liabilities are as follows (in thousands):

			September 30, 2022						December 31, 2021
Derivative instruments			$	3,199					$	6,267
Lease liabilities - current			715						1,098
Other current liabilities			3,815						3,882
Total other current liabilities			$	7,729					$	11,247

5. CONTINGENCIES

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

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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 its future results of operations.

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 we reimburse Samsung with respect to withholding tax and penalties imposed on Samsung by the Korean tax authorities following an investigation where the tax authority determined that Samsung failed to withhold taxes on Samsung’s royalty payments to Immersion Software Ireland from 2012 to 2016. On July 12, 2017, on behalf of Samsung, Immersion filed an appeal with the Korea Tax Tribunal regarding their findings with respect to the withholding taxes and penalties. On October 18, 2018, the Korea Tax Tribunal held a hearing and on November 19, 2018, the Korea Tax Tribunal issued its ruling in which it decided not to accept our arguments with respect to the Korean tax authorities’ assessment of withholding tax and penalties imposed on Samsung. On behalf of Samsung, we filed an appeal with the Korea Administrative Court on February 15, 2019. On July 16, 2020, the Korea Administrative Court issued its ruling in which it ruled that the withholding taxes and penalties which were imposed by the Korean tax authorities on Samsung should be cancelled with some litigation costs to be borne by the Korean tax authorities.

On August 1, 2020, the Korean tax authorities filed an appeal with the Korea High Court. The first hearing in the Korea High Court occurred on November 11, 2020. A second hearing occurred on January 13, 2021. A third hearing occurred on March 21, 2021. The Korea High Court had indicated that a final decision was originally expected on May 28, 2021, but instead, decided to hold a fourth hearing on July 9, 2021. On October 1, 2021, the Korea High Court issued its ruling in which it ruled that withholding taxes and penalties totaling approximately KRW 6,186,218,586 (approximately $5.2 million) in national-level withholding tax and local withholding taxes imposed by the Korean tax authorities on Samsung for royalties paid to Immersion during the period of 2012 – 2014 be cancelled on the basis that the Korea tax authorities wrongfully engaged in a duplicative audit with respect to such time period. The Korea High Court also ruled that approximately KRW1,655,105,584 (approximately $1.4 million) of national-level withholding tax and local withholding taxes imposed by the Korean tax authorities on Samsung for royalties paid to Immersion during 2015 and 2016 be upheld in part on the basis that Immersion Software Ireland Limited did not have sufficient economic substance to be considered the beneficial owner of the royalties paid by Samsung to Immersion Software Ireland Limited. On or about October 22, 2021, the Korean tax authorities filed an appeal with the Korea Supreme Court with respect to certain portions of the Korea High Court decision and we filed an appeal with the Korea Supreme Court with respect to certain portions of the Korea High Court decision.

On December 1, 2021, the Korean tax authorities submitted its brief to the Korea Supreme Court challenging the cancellation by the Korea High Court of a portion of the withholding tax imposed by the Korean tax authorities. On December 3, 2021, we submitted our own br