\n Advertising
\nAdvertising costs (including obligations under cooperative\n marketing programs) are expensed as incurred and included in sales\n and marketing expense. Advertising expense was as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Year ended\n December 31, | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n | \n | (In\n thousands) | \n\n | |||||||||
| \n | \n | \n | \n | |||||||||
| \n Advertising\n expense \n | \n \n | $ | \n344 | \n\n | \n | $ | \n322 | \n\n | \n | $ | \n152 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
8.\n Commitments
\nThe Company leases several of its facilities under\n noncancelable operating lease arrangements that expire at various\n dates through 2023.
\nOn November 12, 2014, the Company entered into an\n amendment to the lease of its primary facilities. The amendment\n terminates the lease of the current San Jose, California facility\n of approximately 33,000 square feet as of May 2015, which was\n scheduled to expire in December 2016. It also begins the lease of a\n San Jose, California facility of approximately 42,000 square feet\n as of February 2015. The lease contains provisions for leasehold\n improvement incentives and expires as of April 2023 and can be\n extended to April 2028. Minimum future lease payments obligations\n are as follows:
\n\n
\n| \n | \n | \n | \n | \n |
| \n | \n | Operating Leases | \n\n | |
| \n | \n | (In thousands) | \n\n | |
| \n 2015 \n | \n \n | \n | 993 | \n\n |
| \n 2016 \n | \n \n | \n | 829 | \n\n |
| \n 2017 \n | \n \n | \n | 865 | \n\n |
| \n 2018 \n | \n \n | \n | 972 | \n\n |
| \n 2019 \n | \n \n | \n | 843 | \n\n |
| \n Thereafter \n | \n \n | \n | 2,991 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n7,493 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
Rent expense was as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Year ended\n December 31, | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n | \n | (In\n thousands) | \n\n | |||||||||
| \n | \n | \n | \n | |||||||||
| \n Rent expense \n | \n \n | $ | \n742 | \n\n | \n | $ | \n549 | \n\n | \n | $ | \n550 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
13. Net\n Income (Loss) Per Share
\nThe following is a reconciliation of the numerators and\n denominators used in computing basic and diluted net income (loss)\n per share:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Years Ended\n December 31, | \n\n | |||||||||
| \n | \n | 2014 | \n\n | \n | 2013 | \n\n | \n | 2012 | \n\n | |||
| \n | \n | (In thousands, except per share amounts) | \n\n | |||||||||
| \n Numerator: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Income (loss) from\n continuing operations \n | \n \n | $ | \n4,123 | \n\n | \n | $ | \n40,155 | \n\n | \n | $ | \n(7,350) | \n\n |
| \n Gain from discontinued\n operations , net of tax \n | \n \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 153 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Net income (loss) used in\n computing basic and diluted net income (loss) per share \n | \n \n | $ | \n4,123 | \n\n | \n | $ | \n40,155 | \n\n | \n | $ | \n(7,197) | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | \n | |||||||||
| \n Denominator: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Shares used in computation\n of basic and diluted net income (loss) per share (weighted average\n common shares outstanding) \n | \n \n | \n | 28,246 | \n\n | \n | \n | 28,190 | \n\n | \n | \n | 27,735 | \n\n |
| \n | \n | \n | \n | |||||||||
| \n Dilutive potential common\n shares: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Restricted Stock and\n RSUs \n | \n \n | \n | 261 | \n\n | \n | \n | 343 | \n\n | \n | \n | 0 | \n\n |
| \n Stock options \n | \n \n | \n | 637 | \n\n | \n | \n | 805 | \n\n | \n | \n | 0 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Shares used in computation\n of diluted net income (loss) per share \n | \n \n | \n | 29,144 | \n\n | \n | \n | 29,338 | \n\n | \n | \n | 27,735 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | \n | |||||||||
| \n Basic net income (loss) per\n share from: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Continuing\n operations \n | \n \n | $ | \n0.15 | \n\n | \n | $ | \n1.42 | \n\n | \n | $ | \n(0.27) | \n\n |
| \n Discontinued\n operations \n | \n \n | \n | 0.00 | \n\n | \n | \n | 0.00 | \n\n | \n | \n | 0.01 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n0.15 | \n\n | \n | $ | \n1.42 | \n\n | \n | $ | \n(0.26) | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Diluted net income (loss)\n per share from: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Continuing\n operations \n | \n \n | $ | \n0.14 | \n\n | \n | $ | \n1.37 | \n\n | \n | $ | \n(0.27) | \n\n |
| \n Discontinued\n operations \n | \n \n | \n | 0.00 | \n\n | \n | \n | 0.00 | \n\n | \n | \n | 0.01 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n0.14 | \n\n | \n | $ | \n1.37 | \n\n | \n | $ | \n(0.26) | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
For the year ended December 31, 2014, options to purchase\n approximately 1.6 million shares of common stock with an\n exercise price greater than the average fair market value of the\n Company’s stock of $10.46 per share were not included in the\n calculation because the effect would have been\n anti-dilutive.
\nFor the year ended December 31, 2013, options to purchase\n approximately 979,521 shares of common stock with an exercise price\n greater than the average fair market value of the Company’s\n stock of $11.72 per share were not included in the calculation\n because the effect would have been anti-dilutive.
\n\n
\nAs of December 31, 2012, the Company had securities\n outstanding that could potentially dilute basic earnings per share\n in the future, but were excluded from the computation of diluted\n net loss per share in the periods presented since their effect\n would have been anti-dilutive. These outstanding securities\n consisted of the following:
\n\n
\n| \n | \n | \n | \n | \n |
| \n | \n | Year Ended December 31, | \n\n | |
| \n | \n | \n 2012 \n | \n \n | |
| \n Outstanding stock\n options \n | \n \n | \n | 3,155,631 | \n\n |
| \n Unvested restricted stock\n awards \n | \n \n | \n | 44,000 | \n\n |
| \n Unvested restricted stock\n units \n | \n \n | \n | 708,651 | \n\n |
For purposes of the reconciliation between the benefit\n (provision) for income taxes at the statutory rate and the\n effective tax rate, a national U.S. 35% rate is applied as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2014 | \n\n | \n | 2013 | \n\n | \n | 2012 | \n\n | |||
| \n Federal statutory tax\n rate \n | \n \n | \n | 35.0 | \n% | \n\n | \n | 35.0 | \n% | \n\n | \n | 35.0 | \n% | \n
| \n State taxes, net of federal\n benefit \n | \n \n | \n | 0.0 | \n% | \n\n | \n | 0.1 | \n% | \n\n | \n | 2.3 | \n% | \n
| \n Foreign\n withholding \n | \n \n | \n | 3.5 | \n% | \n\n | \n | 8.2 | \n% | \n\n | \n | (13.0 | \n)% | \n
| \n Stock compensation\n expense \n | \n \n | \n | 3.8 | \n% | \n\n | \n | 2.5 | \n% | \n\n | \n | (2.6 | \n)% | \n
| \n Meals &\n entertainment \n | \n \n | \n | 0.1 | \n% | \n\n | \n | 0.3 | \n% | \n\n | \n | (0.2 | \n)% | \n
| \n Foreign rate\n differential \n | \n \n | \n | (1.1 | \n)% | \n\n | \n | (1.7 | \n)% | \n\n | \n | (2.8 | \n)% | \n
| \n Prior year true-up\n items \n | \n \n | \n | (0.2 | \n)% | \n\n | \n | 0.1 | \n% | \n\n | \n | 0.1 | \n% | \n
| \n Tax reserves \n | \n \n | \n | 0.8 | \n% | \n\n | \n | 1.3 | \n% | \n\n | \n | (0.1 | \n)% | \n
| \n Benefit of discontinued\n operations \n | \n \n | \n | 0.0 | \n% | \n\n | \n | 0.0 | \n% | \n\n | \n | 1.5 | \n% | \n
| \n Credits \n | \n \n | \n | (5.7 | \n)% | \n\n | \n | (11.0 | \n)% | \n\n | \n | 13.0 | \n% | \n
| \n Other \n | \n \n | \n | (1.4 | \n)% | \n\n | \n | 0.0 | \n% | \n\n | \n | 0.3 | \n% | \n
| \n Valuation\n allowance \n | \n \n | \n | 0.0 | \n% | \n\n | \n | (1028.3 | \n)% | \n\n | \n | (45.6 | \n)% | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Effective tax\n rate \n | \n \n | \n | 34.8 | \n% | \n\n | \n | (993.5 | \n)% | \n\n | \n | (12.1 | \n)% | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
The assumptions used to value option grants under the\n Company’s stock plans are as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Standard Stock Options | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n Expected life (in\n years) \n | \n \n | \n | 4.7 | \n\n | \n | \n | 4.9 | \n\n | \n | \n | 4.5 | \n\n |
| \n Interest rate \n | \n \n | \n | 1.4 | \n% | \n\n | \n | 0.8 | \n% | \n\n | \n | 0.7 | \n% | \n
| \n Volatility \n | \n \n | \n | 57 | \n% | \n\n | \n | 70 | \n% | \n\n | \n | 70 | \n% | \n
| \n Dividend yield \n | \n \n | \n | 0.0 | \n% | \n\n | \n | 0.0 | \n% | \n\n | \n | 0.0 | \n% | \n
\n
\n| \n | \n | \n | \n | \n |
| \n | \n | Market Condition Based Stock Options | \n\n | |
| \n | \n | \n 2014 \n | \n \n | |
| \n Expected life (in\n years) \n | \n \n | \n | 7.0 | \n\n |
| \n Interest rate \n | \n \n | \n | 2.2 | \n% | \n
| \n Volatility \n | \n \n | \n | 66 | \n% | \n
| \n Dividend yield \n | \n \n | \n | 0.0 | \n% | \n
\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Employee Stock Purchase Plan | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n Expected life (in\n years) \n | \n \n | \n | 0.5 | \n\n | \n | \n | 0.5 | \n\n | \n | \n | 0.5 | \n\n |
| \n Interest rate \n | \n \n | \n | 0.1 | \n% | \n\n | \n | 0.1 | \n% | \n\n | \n | 0.1 | \n% | \n
| \n Volatility \n | \n \n | \n | 43 | \n% | \n\n | \n | 67 | \n% | \n\n | \n | 62 | \n% | \n
| \n Dividend yield \n | \n \n | \n | 0.0 | \n% | \n\n | \n | 0.0 | \n% | \n\n | \n | 0.0 | \n% | \n
\n Comprehensive Income (Loss)
\nComprehensive income (loss) includes net income (loss) as well\n as other items of comprehensive income or loss. The Company’s\n other comprehensive income (loss) consists of foreign currency\n translation adjustments and unrealized gains and losses on\n available-for-sale securities, net of tax.
\nFinancial instruments measured at fair value on a recurring\n basis as of December 31, 2014 and December 31, 2013 are\n classified based on the valuation technique in the table\n below:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | December 31,\n 2014 \n Fair value\n measurements using | \n \n | \n | Total | \n\n | ||||||||||
| \n | \n | Quoted Prices in \n Active\n Markets \n for\n Identical \n Assets \n (Level\n 1) | \n \n | \n | Significant \n Other \n Observable \n Inputs \n (Level\n 2) | \n \n | \n | Significant \n Unobservable \n Inputs\n \n \n (Level\n 3) \n | \n \n | \n | ||||||
| \n | \n | (In\n thousands) | \n\n | |||||||||||||
| \n Assets: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n U.S. Treasury\n securities \n | \n \n | $ | \n0 | \n\n | \n | $ | \n42,981 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n42,981 | \n\n |
| \n Money market\n funds \n | \n \n | \n | 11,524 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 11,524 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total assets at fair\n value \n | \n \n | $ | \n11,524 | \n\n | \n | $ | \n42,981 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n54,505 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
The above table excludes $2.9 million of cash held in\n banks.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | December 31,\n 2013 \n Fair value\n measurements using | \n \n | \n | Total | \n\n | ||||||||||
| \n | \n | Quoted Prices in \n Active\n Markets \n for\n Identical \n Assets \n (Level\n 1) | \n \n | \n | Significant \n Other \n Observable \n Inputs \n (Level\n 2) | \n \n | \n | Significant \n Unobservable \n Inputs\n \n \n (Level\n 3) \n | \n \n | \n | ||||||
| \n | \n | (In\n thousands) | \n\n | |||||||||||||
| \n Assets: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n U.S. Treasury\n securities \n | \n \n | $ | \n0 | \n\n | \n | $ | \n56,976 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n56,976 | \n\n |
| \n Money market\n funds \n | \n \n | \n | 10,075 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 10,075 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total assets at fair\n value \n | \n \n | $ | \n10,075 | \n\n | \n | $ | \n56,976 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n67,051 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
The above table excludes $4.1 million of cash held in\n banks.
\n\n Income\n Taxes
\nThe Company uses the asset and liability method of accounting\n for income taxes. Under this method, income tax expense is\n recognized for the amount of taxes payable or refundable for the\n current year. In addition, deferred tax assets and liabilities are\n recognized for the expected future tax consequences of temporary\n differences between the financial reporting and tax bases of assets\n and liabilities, and for operating losses and tax credit\n carryforwards. Valuation allowances are established when necessary\n to reduce deferred tax assets to the amount expected to be realized\n and are reversed at such time that realization is believed to be\n more likely than not.
\n\n Short-term\n Investments
\nThe Company’s short-term investments consist primarily of\n U.S treasury bills and government agency securities purchased with\n an original or remaining maturity of greater than 90 days on the\n date of purchase. The Company classifies debt securities with\n readily determinable market values as\n “available-for-sale.” Even though the stated maturity\n dates of these debt securities may be one year or more beyond the\n balance sheet date, the Company has classified all debt securities\n as short-term investments as they are reasonably expected to be\n realized in cash or sold within one year. These investments are\n carried at fair market value with unrealized gains and losses\n considered to be temporary in nature reported as a separate\n component of other comprehensive income (loss) within\n stockholders’ equity.
\nThe Company recognizes an impairment charge in the consolidated\n statement of operations when a decline in value is judged to be\n other than temporary based on the specific identification method.\n Other-than-temporary impairment charges may exist when the Company\n has the intent to sell the security, will more likely than not be\n required to sell the security, or does not expect to recover the\n principal.
\nThese outstanding securities consisted of the\n following:
\n\n
\n| \n | \n | \n | \n | \n |
| \n | \n | Year Ended December 31, | \n\n | |
| \n | \n | \n 2012 \n | \n \n | |
| \n Outstanding stock\n options \n | \n \n | \n | 3,155,631 | \n\n |
| \n Unvested restricted stock\n awards \n | \n \n | \n | 44,000 | \n\n |
| \n Unvested restricted stock\n units \n | \n \n | \n | 708,651 | \n\n |
\n Short-term\n Investments
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | December 31,\n 2014 | \n\n | |||||||||||||
| \n | \n | Amortized \n Cost | \n \n | \n | Gross \n Unrealized \n Holding \n Gains | \n \n | \n | Gross \n Unrealized \n Holding \n Losses | \n \n | \n | Fair Value | \n\n | ||||
| \n | \n | (In\n thousands) | \n\n | |||||||||||||
| \n U.S. Treasury\n securities \n | \n \n | $ | \n42,980 | \n\n | \n | $ | \n1 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n42,981 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n42,980 | \n\n | \n | $ | \n1 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n42,981 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | December 31,\n 2013 | \n\n | |||||||||||||
| \n | \n | Amortized \n Cost | \n \n | \n | Gross \n Unrealized \n Holding \n Gains | \n \n | \n | Gross \n Unrealized \n Holding \n Losses | \n \n | \n | Fair Value | \n\n | ||||
| \n | \n | (In\n thousands) | \n\n | |||||||||||||
| \n U.S. Treasury\n securities \n | \n \n | $ | \n56,966 | \n\n | \n | $ | \n10 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n56,976 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n56,966 | \n\n | \n | $ | \n10 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n56,976 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
The Company reported pre-tax book income (loss) from continuing\n operations of:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Years Ended December 31, | \n\n | |||||||||
| \n | \n | 2014 | \n\n | \n | 2013 | \n\n | \n | 2012 | \n\n | |||
| \n | \n | (In\n thousands) | \n\n | |||||||||
| \n Domestic \n | \n \n | $ | \n5,867 | \n\n | \n | $ | \n3,349 | \n\n | \n | $ | \n(2,175 | \n) | \n
| \n Foreign \n | \n \n | \n | 452 | \n\n | \n | \n | 323 | \n\n | \n | \n | (4,383 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n6,319 | \n\n | \n | $ | \n3,672 | \n\n | \n | $ | \n(6,558) | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
The following table sets forth the summary of option activity\n under the Company’s stock option plans for the years ended\n December 31, 2014, 2013, and 2012:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Number \n of\n Shares | \n \n | \n | Weighted \n Average \n Exercise Price | \n \n | \n | Weighted \n Average \n Fair Value \n Of Options \n Granted | \n \n | \n | Aggregate \n Intrinsic \n Value \n of\n Options \n Exercised \n (In thousands) | \n \n | ||||
| \n | \n | \n | \n | \n | ||||||||||||
| \n Outstanding at\n January 1, 2012 \n | \n \n | \n | 3,267,838 | \n\n | \n | $ | \n6.61 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Granted \n | \n \n | \n | 425,150 | \n\n | \n | \n | 6.10 | \n\n | \n | $ | \n3.35 | \n\n | \n | \n | \n | \n |
| \n Exercised \n | \n \n | \n | (231,403 | \n) | \n\n | \n | 4.52 | \n\n | \n | \n | \n | \n | \n | $ | \n443 | \n\n |
| \n Forfeited \n | \n \n | \n | (47,959 | \n) | \n\n | \n | 5.89 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Expired \n | \n \n | \n | (257,995 | \n) | \n\n | \n | 7.32 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Outstanding at\n December 31, 2012 \n | \n \n | \n | 3,155,631 | \n\n | \n | \n | 6.65 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Granted \n | \n \n | \n | 1,058,700 | \n\n | \n | \n | 10.20 | \n\n | \n | \n | 5.63 | \n\n | \n | \n | \n | \n |
| \n Exercised \n | \n \n | \n | (956,633 | \n) | \n\n | \n | 6.68 | \n\n | \n | \n | \n | \n | \n | \n | 5,774 | \n\n |
| \n Forfeited \n | \n \n | \n | (10,531 | \n) | \n\n | \n | 8.24 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Expired \n | \n \n | \n | (20,000 | \n) | \n\n | \n | 9.01 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Outstanding at\n December 31, 2013 \n | \n \n | \n | 3,227,167 | \n\n | \n | \n | 7.78 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Granted \n | \n \n | \n | 604,620 | \n\n | \n | \n | 10.32 | \n\n | \n | \n | 4.93 | \n\n | \n | \n | \n | \n |
| \n Exercised \n | \n \n | \n | (205,744 | \n) | \n\n | \n | 6.34 | \n\n | \n | \n | \n | \n | \n | \n | 1,125 | \n\n |
| \n Forfeited \n | \n \n | \n | (102,454 | \n) | \n\n | \n | 7.20 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Expired \n | \n \n | \n | (37,432 | \n) | \n\n | \n | 10.19 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Outstanding at\n December 31, 2014 \n | \n \n | \n | 3,486,157 | \n\n | \n | \n | 8.30 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
\nThe following table sets forth the summary of the\n market-based option activity under the Company’s stock option\n plans for the year ended December 31, 2014:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Number \n of \n Shares | \n \n | \n | Weighted \n Average \n Exercise \n Price | \n \n | \n | Weighted \n Average \n Fair Value \n Of Options \n \n Granted | \n \n | \n | Aggregate \n Intrinsic \n Value \n of\n Options \n Exercised \n (In thousands) | \n \n | ||||
| \n Outstanding at\n January 1, 2014 \n | \n \n | \n | 0 | \n\n | \n | $ | \n0.00 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Granted \n | \n \n | \n | 50,000 | \n\n | \n | \n | 11.94 | \n\n | \n | \n | 5.71 | \n\n | \n | \n | \n | \n |
| \n Exercised \n | \n \n | \n | 0 | \n\n | \n | \n | 0.00 | \n\n | \n | \n | \n | \n | \n | \n | 0 | \n\n |
| \n Forfeited \n | \n \n | \n | 0 | \n\n | \n | \n | 0.00 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Expired \n | \n \n | \n | 0 | \n\n | \n | \n | 0.00 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Outstanding at\n December 31, 2014 \n | \n \n | \n | 50,000 | \n\n | \n | \n | 11.94 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
16. Segment\n Reporting, Geographic Information, and Significant\n Customers
\n\n Segment\n Information
\nThe Company develops, licenses, and supports a wide range of\n software and IP that more fully engage users’ sense of touch\n when operating digital devices. The Company focuses on the\n following target application areas: mobile devices, wearables,\n consumer, mobile entertainment and other content; console gaming;\n automotive; medical; and commercial. The Company manages these\n application areas in one operating and reporting segment with one\n set of management, development, and administrative\n personnel.
\nThe Company’s chief operating decision maker\n (“CODM”) is the Chief Executive Officer. The CODM\n allocates resources to and assesses the performance of the Company\n using information about its revenue and operating loss. There is\n only one segment that is reported to management.
\n\n
\n\n Revenue by\n Market Area
\nThe following is a summary of revenues by market areas. Revenue\n as a percentage of total revenues by market was as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Years Ended December 31, | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n | \n | \n | \n | |||||||||
| \n Mobile, Wearables, and\n Consumer \n | \n \n | \n | 60 | \n% | \n\n | \n | 66 | \n% | \n\n | \n | 46 | \n% | \n
| \n Gaming Devices \n | \n \n | \n | 27 | \n% | \n\n | \n | 21 | \n% | \n\n | \n | 28 | \n% | \n
| \n Automotive \n | \n \n | \n | 5 | \n% | \n\n | \n | 5 | \n% | \n\n | \n | 6 | \n% | \n
| \n Medical \n | \n \n | \n | 8 | \n% | \n\n | \n | 8 | \n% | \n\n | \n | 16 | \n% | \n
| \n Other \n | \n \n | \n | 0 | \n% | \n\n | \n | 0 | \n% | \n\n | \n | 4 | \n% | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | \n | 100 | \n% | \n\n | \n | 100 | \n% | \n\n | \n | 100 | \n% | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Revenue by\n Region
\nThe following is a summary of revenues by geographic areas.\n Revenues are broken out geographically by the ship-to location of\n the customer. Geographic revenue as a percentage of total revenues\n by region was as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Years Ended December 31, | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n | \n | \n | \n | |||||||||
| \n North America \n | \n \n | \n | 29 | \n% | \n\n | \n | 28 | \n% | \n\n | \n | 41 | \n% | \n
| \n Europe \n | \n \n | \n | 3 | \n% | \n\n | \n | 4 | \n% | \n\n | \n | 13 | \n% | \n
| \n Asia \n | \n \n | \n | 68 | \n% | \n\n | \n | 68 | \n% | \n\n | \n | 46 | \n% | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | \n | 100 | \n% | \n\n | \n | 100 | \n% | \n\n | \n | 100 | \n% | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
Geographic revenue as a percentage of total revenues by country\n was as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Years Ended December 31, | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n | \n | \n | \n | |||||||||
| \n United States of\n America \n | \n \n | \n | 27 | \n% | \n\n | \n | 26 | \n% | \n\n | \n | 38 | \n% | \n
| \n Korea \n | \n \n | \n | 51 | \n% | \n\n | \n | 58 | \n% | \n\n | \n | 36 | \n% | \n
| \n Japan \n | \n \n | \n | 10 | \n% | \n\n | \n | 7 | \n% | \n\n | \n | \n | * | \n
| \n Countries of which none are\n more than 10% in a year \n | \n \n | \n | 12 | \n% | \n\n | \n | 9 | \n% | \n\n | \n | 26 | \n% | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | \n | 100 | \n% | \n\n | \n | 100 | \n% | \n\n | \n | 100 | \n% | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n
\n* Represents less than 10% of the Company’s revenue and\n is included below.
\nThe majority of the Company’s long-lived assets are\n located in the United States of America. Long-lived assets include\n net property and equipment, intangibles, long-term investments, and\n other assets. Long-lived assets that were outside the United States\n of America constituted less than 10% of the total on\n December 31, 2014, December 31, 2013, and\n December 31, 2012.
\n\n
\nSignificant\n Customers
\nCustomers comprising 10% or greater of the Company’s net\n revenues are summarized as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Years Ended December 31, | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n | \n | \n | \n | |||||||||
| \n Samsung\n Electronics \n | \n \n | \n | 38 | \n% | \n\n | \n | 47 | \n% | \n\n | \n | 24 | \n% | \n
| \n Customer B \n | \n \n | \n | 17 | \n% | \n\n | \n | \n | * | \n\n | \n | \n | * | \n
| \n Customer C \n | \n \n | \n | 12 | \n% | \n\n | \n | \n | * | \n\n | \n | \n | * | \n
| \n Customer D \n | \n \n | \n | \n | * | \n\n | \n | \n | * | \n\n | \n | \n | * | \n
| \n Customer E \n | \n \n | \n | \n | * | \n\n | \n | \n | * | \n\n | \n | \n | * | \n
| \n Customer F \n | \n \n | \n | \n | * | \n\n | \n | \n | * | \n\n | \n | \n | * | \n
| \n Customer G \n | \n \n | \n | \n | * | \n\n | \n | \n | * | \n\n | \n | \n | * | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | \n | 67 | \n% | \n\n | \n | 47 | \n% | \n\n | \n | 24 | \n% | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n
\n* Revenue derived from customer represented less than 10% for\n the period.
\nCustomers comprising 10% or greater of the Company’s\n outstanding accounts and other receivable are summarized as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | December 31, | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n | \n | \n | \n | |||||||||
| \n Samsung\n Electronics \n | \n \n | \n | \n | * | \n\n | \n | \n | * | \n\n | \n | \n | * | \n
| \n Customer B \n | \n \n | \n | \n | * | \n\n | \n | \n | * | \n\n | \n | \n | * | \n
| \n Customer C \n | \n \n | \n | 66 | \n% | \n\n | \n | \n | * | \n\n | \n | 33 | \n% | \n
| \n Customer D \n | \n \n | \n | \n | * | \n\n | \n | \n | * | \n\n | \n | 38 | \n% | \n
| \n Customer E \n | \n \n | \n | \n | * | \n\n | \n | 11 | \n% | \n\n | \n | \n | * | \n
| \n Customer F \n | \n \n | \n | \n | * | \n\n | \n | \n | * | \n\n | \n | 10 | \n% | \n
| \n Customer G \n | \n \n | \n | 16 | \n% | \n\n | \n | 28 | \n% | \n\n | \n | \n | * | \n
\n
\n* Represents less than 10% of the Company’s outstanding\n accounts and other receivables.
\n2. Fair\n Value Disclosures
\n\n Cash\n Equivalents and Short-term Investments
\nThe financial instruments of the Company measured at fair value\n on a recurring basis are cash equivalents and short-term\n investments.
\nThe Company’s fixed income available-for-sale securities\n consist of high quality, investment grade securities. The Company\n values these securities based on pricing from pricing vendors, who\n may use quoted prices in active markets for identical assets (Level\n 1) or inputs other than quoted prices that are observable either\n directly or indirectly (Level 2) in determining fair\n value.
\nThe types of instruments valued based on quoted market prices\n in active markets include most money market securities. Such\n instruments are generally classified within Level 1 of the fair\n value hierarchy.
\nThe types of instruments valued based on quoted prices in\n markets that are less active, broker or dealer quotations, or\n alternative pricing sources with reasonable levels of price\n transparency are generally classified within Level 2 of the fair\n value hierarchy and include most U.S. treasury securities and most\n investment-grade corporate commercial paper.
\nThe types of instruments valued based on unobservable inputs\n which reflect the reporting entity’s own assumptions or data\n that market participants would use in valuing an instrument are\n generally classified within Level 3 of the fair value\n hierarchy.
\n\n
\nFinancial instruments measured at fair value on a recurring\n basis as of December 31, 2014 and December 31, 2013 are\n classified based on the valuation technique in the table\n below:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | December 31,\n 2014 \n Fair value\n measurements using | \n \n | \n | Total | \n\n | ||||||||||
| \n | \n | Quoted Prices in \n Active\n Markets \n for\n Identical \n Assets \n (Level\n 1) | \n \n | \n | Significant \n Other \n Observable \n Inputs \n (Level\n 2) | \n \n | \n | Significant \n Unobservable \n Inputs\n \n \n (Level\n 3) \n | \n \n | \n | ||||||
| \n | \n | (In\n thousands) | \n\n | |||||||||||||
| \n Assets: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n U.S. Treasury\n securities \n | \n \n | $ | \n0 | \n\n | \n | $ | \n42,981 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n42,981 | \n\n |
| \n Money market\n funds \n | \n \n | \n | 11,524 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 11,524 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total assets at fair\n value \n | \n \n | $ | \n11,524 | \n\n | \n | $ | \n42,981 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n54,505 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
The above table excludes $2.9 million of cash held in\n banks.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | December 31,\n 2013 \n Fair value\n measurements using | \n \n | \n | Total | \n\n | ||||||||||
| \n | \n | Quoted Prices in \n Active\n Markets \n for\n Identical \n Assets \n (Level\n 1) | \n \n | \n | Significant \n Other \n Observable \n Inputs \n (Level\n 2) | \n \n | \n | Significant \n Unobservable \n Inputs\n \n \n (Level\n 3) \n | \n \n | \n | ||||||
| \n | \n | (In\n thousands) | \n\n | |||||||||||||
| \n Assets: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n U.S. Treasury\n securities \n | \n \n | $ | \n0 | \n\n | \n | $ | \n56,976 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n56,976 | \n\n |
| \n Money market\n funds \n | \n \n | \n | 10,075 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 10,075 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total assets at fair\n value \n | \n \n | $ | \n10,075 | \n\n | \n | $ | \n56,976 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n67,051 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
The above table excludes $4.1 million of cash held in\n banks.
\n\n Short-term\n Investments
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | December 31,\n 2014 | \n\n | |||||||||||||
| \n | \n | Amortized \n Cost | \n \n | \n | Gross \n Unrealized \n Holding \n Gains | \n \n | \n | Gross \n Unrealized \n Holding \n Losses | \n \n | \n | Fair Value | \n\n | ||||
| \n | \n | (In\n thousands) | \n\n | |||||||||||||
| \n U.S. Treasury\n securities \n | \n \n | $ | \n42,980 | \n\n | \n | $ | \n1 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n42,981 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n42,980 | \n\n | \n | $ | \n1 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n42,981 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | December 31,\n 2013 | \n\n | |||||||||||||
| \n | \n | Amortized \n Cost | \n \n | \n | Gross \n Unrealized \n Holding \n Gains | \n \n | \n | Gross \n Unrealized \n Holding \n Losses | \n \n | \n | Fair Value | \n\n | ||||
| \n | \n | (In\n thousands) | \n\n | |||||||||||||
| \n U.S. Treasury\n securities \n | \n \n | $ | \n56,966 | \n\n | \n | $ | \n10 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n56,976 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n56,966 | \n\n | \n | $ | \n10 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n56,976 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
The contractual maturities of the Company’s\n available-for-sale securities on December 31, 2014 and\n December 31, 2013 were all due within one year.
\n\n Intangible\n Assets
\nIntangible assets with finite useful lives are amortized and\n intangible assets with indefinite lives are not amortized but\n rather are tested at least annually for impairment.
\nThe Company has acquired patents and other intangible assets.\n Costs associated with acquired patents and other intangible assets\n are capitalized as incurred. These costs are amortized utilizing\n the straight-line method, which approximates the pattern of\n consumption over the estimated useful lives of the respective\n assets, generally ten years.
\nThe Company also internally develops and licenses IP and\n software, and when possible, it protects its IP and software with\n patents and trademarks. External patent-related costs are expensed\n as incurred and classified as general and administrative expenses\n in the consolidated statement of operations, consistent with the\n classification of internal legal costs associated with internally\n developed patents and trademarks.
\nTotal stock-based compensation recognized in the consolidated\n statements of operations is as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n Year Ended December 31, \n | \n \n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n \n Income\n Statement Classifications \n | \n \n | (In\n thousands) | \n\n | |||||||||
| \n | \n | \n | \n | |||||||||
| \n Sales and\n marketing \n | \n \n | $ | \n1,117 | \n\n | \n | $ | \n747 | \n\n | \n | $ | \n547 | \n\n |
| \n Research and\n development \n | \n \n | \n | 1,267 | \n\n | \n | \n | 1,040 | \n\n | \n | \n | 756 | \n\n |
| \n General and\n administrative \n | \n \n | \n | 2,911 | \n\n | \n | \n | 2,857 | \n\n | \n | \n | 1,843 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n5,295 | \n\n | \n | $ | \n4,644 | \n\n | \n | $ | \n3,146 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
The table below includes estimated remaining annual\n amortization expense for purchased patents as of December 31,\n 2014.
\n\n
\n| \n | \n | \n | \n | \n |
| \n | \n | Estimated \n Amortization \n Expense | \n \n | |
| \n | \n | (In thousands) | \n\n | |
| \n 2015 \n | \n \n | $ | \n20 | \n\n |
| \n 2016 \n | \n \n | \n | 6 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n26 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
\n Revenue\n Recognition
\nThe Company recognizes revenues in accordance with applicable\n accounting standards, including ASC 605-10-S99, “Revenue\n Recognition” (“ASC 605-10-S99”); ASC 605-25,\n “Multiple Element Arrangements” (“ASC\n 605-25”); and ASC 985-605, “Software-Revenue\n Recognition” (“ASC 985-605”). The Company derives\n its revenues from three principal sources: royalty and license\n fees, development contract and service fees, and, previously,\n product sales. As described below, management judgments,\n assumptions, and estimates must be made and used in connection with\n the revenue recognized in any accounting period. Material\n differences may result in the amount and timing of revenue for any\n period based on the judgments and estimates made by management.\n Specifically, in connection with each transaction, the Company must\n evaluate whether: (i) persuasive evidence of an arrangement\n exists, (ii) delivery has occurred, (iii) the fee is\n fixed or determinable, and (iv) collectibility is probable.\n The Company applies these criteria as discussed below.
\n\n
\n| \n | • | \n\n | \n Persuasive evidence of an arrangement exists. For a\n license arrangement, the Company requires a written contract,\n signed by both the customer and the Company. For a stand-alone\n product sale, the Company requires a purchase order or other form\n of written agreement with the customer. \n | \n
| \n | • | \n\n | \n Delivery has occurred. The Company delivers software and\n product to customers physically and also delivers software\n electronically. For physical deliveries not related to software,\n the transfer terms typically include transfer of title and risk of\n loss at the Company’s shipping location. For electronic\n deliveries, delivery occurs when the Company provides the customer\n access codes or “keys” that allow the customer to take\n immediate possession of the software. \n | \n
| \n | • | \n\n | \n The fee is fixed or determinable. The Company’s\n arrangement fee is based on the use of standard payment terms which\n are those that are generally extended to the majority of customers.\n For transactions involving extended payment terms, the Company\n deems these fees not to be fixed or determinable for revenue\n recognition purposes and revenue is deferred until the fees become\n due and payable. \n | \n
| \n | • | \n\n | \n Collectibility is probable. To recognize revenue, the\n Company must judge collectibility of fees, which is done on a\n customer-by-customer basis pursuant to the Company’s credit\n review policy. The Company typically sells to customers with whom\n there is a history of successful collection. For new customers, the\n Company evaluates the customer’s financial condition and\n ability to pay. If it is determined that collectibility is not\n probable based upon the credit review process or the\n customer’s payment history, revenue is recognized when\n payment is received. \n | \n
Royalty and license revenue — The Company licenses\n its patents and software to customers in a variety of industries\n such as mobility, gaming, automotive, and medical\n devices. Certain of these are variable fee arrangements\n where the royalties earned by the Company are based on unit or\n sales volumes of the respective licensees. The Company also\n enters into fixed license fee arrangements. The terms of the\n royalty agreements generally require licensees to give notification\n of royalties due to the Company within 30 – 45 days of the\n end of the quarter during which their related sales occur. As\n the Company is unable to reliably estimate the licensees’\n sales in any given quarter to determine the royalties due to it,\n the Company recognizes royalty revenues based on royalties reported\n by licensees and when all revenue recognition criteria are met.\n Certain royalties are based upon customer shipments or revenues and\n could be subject to change and may result in out of period\n adjustments. The Company recognizes fixed license fee revenue for\n licenses when earned under the terms of the agreements, which is\n generally recognized on a straight-line basis over the expected\n term of the license.
\nDevelopment, services, and other revenue —\n Development, services, and other revenue are composed of\n engineering services (engineering services and/or development\n contracts), and in limited cases, post contract customer support\n (“PCS”). Engineering services revenues are recognized\n under the proportional performance accounting method based on\n physical completion of the work to be performed or completed\n performance method. A provision for losses on contracts is made, if\n necessary, in the period in which the loss becomes probable and can\n be reasonably estimated. Revisions in estimates are reflected in\n the period in which the conditions become known. To date, such\n losses have not been significant. Revenue from PCS is typically\n recognized over the period of the ongoing obligation, which is\n generally consistent with the contractual term.
\nMultiple element arrangements — The Company enters\n into multiple element arrangements in which customers purchase\n time-based non-exclusive licenses that cannot be resold to others,\n which include a combination of software and/or IP licenses,\n engineering services, and in limited cases PCS. For arrangements\n that are software based and include software and engineering\n services, the services are generally not essential to the\n functionality of the software, and customers may purchase\n engineering services to facilitate the adoption of the\n Company’s technology, but they may also decide to use their\n own resources or appoint other engineering service organizations to\n perform these services. For arrangements that are in substance\n subscription arrangements, the entire arrangement fee is recognized\n ratably over the contract term, subject to any limitations related\n to extended payment terms. For arrangements involving upfront fees\n for services and royalties earned by the Company based on unit or\n sales volumes of the respective licensees, and the services are\n performed ratably over the arrangement or are front-end loaded, the\n upfront fees are recognized ratably over the contract term and\n royalties based on unit or sales volume are recognized when they\n become fixed and determinable. As the Company is unable to reliably\n estimate the licensees’ sales in any given quarter to\n determine the royalties due to it, the Company recognizes per unit\n or sales volume driven royalty revenues based on royalties reported\n by licensees and when all revenue recognition criteria are\n met.
\nProduct sales — The Company recognizes revenue\n from the sale of products and the license of associated software,\n if any, and expenses all related costs of products sold, once\n delivery has occurred and customer acceptance, if required, has\n been achieved. The Company typically grants to customers a warranty\n that guarantees the products will substantially conform to the\n Company’s current specifications for generally three to\n twelve months from the delivery date pursuant to the terms of the\n arrangement. Historically, warranty-related costs have not been\n significant. As of December 31, 2013, the Company ceased\n selling products.
\nRent expense was as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Year ended\n December 31, | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n | \n | (In\n thousands) | \n\n | |||||||||
| \n | \n | \n | \n | |||||||||
| \n Rent expense \n | \n \n | $ | \n742 | \n\n | \n | $ | \n549 | \n\n | \n | $ | \n550 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
Additional information regarding standard options outstanding\n as of December 31, 2014 is as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Options\n Outstanding | \n\n | \n | Options\n Exercisable | \n\n | ||||||||||||||
| \n Range of \nExercise \n\n Prices \n | \n \n | Number \n Outstanding | \n \n | \n | Weighted \n Average \n Remaining \n Contractual \n Life\n (Years) | \n \n | \n | Weighted \n Average \n Exercise \n Price | \n \n | \n | Number \n Exercisable | \n \n | \n | Weighted \n Average \n Exercise \n Price | \n \n | |||||
| \n $ 2.70 -\n $3.81 \n | \n \n | \n | 20,297 | \n\n | \n | \n | 4.21 | \n\n | \n | $ | \n2.88 | \n\n | \n | \n | 20,297 | \n\n | \n | $ | \n2.88 | \n\n |
| \n 3.85 - 3.85 \n | \n \n | \n | 600,000 | \n\n | \n | \n | 4.87 | \n\n | \n | \n | 3.85 | \n\n | \n | \n | 600,000 | \n\n | \n | \n | 3.85 | \n\n |
| \n 4.24 - 6.12 \n | \n \n | \n | 578,769 | \n\n | \n | \n | 4.09 | \n\n | \n | \n | 5.86 | \n\n | \n | \n | 467,289 | \n\n | \n | \n | 5.83 | \n\n |
| \n 6.23 - 8.61 \n | \n \n | \n | 453,931 | \n\n | \n | \n | 4.39 | \n\n | \n | \n | 7.44 | \n\n | \n | \n | 366,187 | \n\n | \n | \n | 7.43 | \n\n |
| \n 8.71 - 9.20 \n | \n \n | \n | 315,030 | \n\n | \n | \n | 5.47 | \n\n | \n | \n | 9.16 | \n\n | \n | \n | 101,572 | \n\n | \n | \n | 9.10 | \n\n |
| \n 9.53 - 9.53 \n | \n \n | \n | 850,000 | \n\n | \n | \n | 5.18 | \n\n | \n | \n | 9.53 | \n\n | \n | \n | 229,374 | \n\n | \n | \n | 9.53 | \n\n |
| \n 9.65 - 13.61 \n | \n \n | \n | 355,130 | \n\n | \n | \n | 6.07 | \n\n | \n | \n | 11.64 | \n\n | \n | \n | 18,218 | \n\n | \n | \n | 12.58 | \n\n |
| \n 13.65 -\n 14.80 \n | \n \n | \n | 203,000 | \n\n | \n | \n | 4.80 | \n\n | \n | \n | 14.15 | \n\n | \n | \n | 110,087 | \n\n | \n | \n | 14.31 | \n\n |
| \n 15.12 -\n 15.12 \n | \n \n | \n | 10,000 | \n\n | \n | \n | 2.62 | \n\n | \n | \n | 15.12 | \n\n | \n | \n | 10,000 | \n\n | \n | \n | 15.12 | \n\n |
| \n 16.57 -\n 16.57 \n | \n \n | \n | 100,000 | \n\n | \n | \n | 2.74 | \n\n | \n | \n | 16.57 | \n\n | \n | \n | 100,000 | \n\n | \n | \n | 16.57 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
| \n $2.70 - $16.57 \n | \n \n | \n | 3,486,157 | \n\n | \n | \n | 4.85 | \n\n | \n | $ | \n8.30 | \n\n | \n | \n | 2,023,024 | \n\n | \n | $ | \n7.18 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
\n
\nAdditional information regarding market condition based stock\n options outstanding as of December 31, 2014 is as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Options\n Outstanding | \n\n | \n | Options\n Exercisable | \n\n | ||||||||||||||
| \n Range of \nExercise \n\n Prices \n | \n \n | Number \n Outstanding | \n \n | \n | Weighted \n Average \n Remaining \n Contractual \n Life\n (Years) | \n \n | \n | Weighted \n Average \n Exercise \n Price | \n \n | \n | Number \n Exercisable | \n \n | \n | Weighted \n Average \n Exercise \n Price | \n \n | |||||
| \n $ 11.94 -\n $11.94 \n | \n \n | \n | 50,000 | \n\n | \n | \n | 6.15 | \n\n | \n | $ | \n11.94 | \n\n | \n | \n | 0 | \n\n | \n | $ | \n0.00 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
\n RSU activity\n for the years ended December 31, 2014, 2013, and 2012 was as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Number \n \n of Shares | \n \n | \n | Weighted \n Average \n Grant Date \n Fair Value | \n \n | \n | Fair\n Value \n of Released \n RSU’s \n \n (In thousands) | \n \n | |||
| \n Outstanding at\n January 1, 2012 \n | \n \n | \n | 407,765 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Awarded \n | \n \n | \n | 555,911 | \n\n | \n | $ | \n6.64 | \n\n | \n | \n | \n | \n |
| \n Released \n | \n \n | \n | (203,519 | \n) | \n\n | \n | \n | \n | \n | $ | \n1,128 | \n\n |
| \n Forfeited \n | \n \n | \n | (51,506 | \n) | \n\n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Outstanding at\n December 31, 2012 \n | \n \n | \n | 708,651 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Awarded \n | \n \n | \n | 294,150 | \n\n | \n | \n | 7.12 | \n\n | \n | \n | \n | \n |
| \n Released \n | \n \n | \n | (303,882 | \n) | \n\n | \n | \n | \n | \n | \n | 2,806 | \n\n |
| \n Forfeited \n | \n \n | \n | (30,863 | \n) | \n\n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Outstanding at\n December 31, 2013 \n | \n \n | \n | 668,056 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Awarded \n | \n \n | \n | 265,630 | \n\n | \n | \n | 11.35 | \n\n | \n | \n | \n | \n |
| \n Released \n | \n \n | \n | (317,970 | \n) | \n\n | \n | \n | \n | \n | \n | 3,491 | \n\n |
| \n Forfeited \n | \n \n | \n | (50,825 | \n) | \n\n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Outstanding at\n December 31, 2014 \n | \n \n | \n | 564,891 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n |
Property is stated at cost and is depreciated using the\n straight-line method over the estimated useful life of the related\n asset. The estimated useful lives are typically as\n follows:
\n\n
\n| \n | \n | \n | \n | \n |
| \n Computer equipment and\n purchased software \n | \n \n | \n | 3 years | \n\n |
| \n Machinery and\n equipment \n | \n \n | \n | 3-5 years | \n\n |
| \n Furniture and\n fixtures \n | \n \n | \n | 5 years | \n\n |
The benefit (provision) for income taxes from continuing\n operations consisted of the following:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Years Ended December 31, | \n\n | |||||||||
| \n | \n | 2014 | \n\n | \n | 2013 | \n\n | \n | 2012 | \n\n | |||
| \n | \n | (In\n thousands) | \n\n | |||||||||
| \n Current: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n United States\n federal \n | \n \n | $ | \n(218 | \n) | \n\n | $ | \n(300 | \n) | \n\n | $ | \n91 | \n\n |
| \n Foreign \n | \n \n | \n | (12 | \n) | \n\n | \n | (12 | \n) | \n\n | \n | (902 | \n) | \n
| \n State and\n local \n | \n \n | \n | (75 | \n) | \n\n | \n | (55 | \n) | \n\n | \n | 19 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total current \n | \n \n | $ | \n(305) | \n\n | \n | $ | \n(367 | \n) | \n\n | $ | \n(792 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | \n | |||||||||
| \n Deferred: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n United States\n federal \n | \n \n | \n | (2,137 | \n) | \n\n | \n | 36,190 | \n\n | \n | \n | 0 | \n\n |
| \n Foreign \n | \n \n | \n | 0 | \n\n | \n | \n | 660 | \n\n | \n | \n | 0 | \n\n |
| \n State and\n local \n | \n \n | \n | 246 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total deferred \n | \n \n | \n | (1,891 | \n) | \n\n | \n | 36,850 | \n\n | \n | \n | 0 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | $ | \n(2,196) | \n\n | \n | $ | \n36,483 | \n\n | \n | $ | \n(792 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
SCHEDULE\n II
\nVALUATION AND QUALIFYING\n ACCOUNTS
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Balance at \n Beginning \n of Period | \n \n | \n | Charged to \n Costs and \n Expenses | \n \n | \n | Deductions/ \n Write-offs \n (Recoveries) | \n \n | \n | Balance at \n End of \n Period | \n \n | ||||
| \n | \n | (In\n thousands) | \n\n | |||||||||||||
| \n Year ended\n December 31, 2014 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Allowance for doubtful\n accounts \n | \n \n | $ | \n9 | \n\n | \n | $ | \n16 | \n\n | \n | $ | \n(3 | \n) | \n\n | $ | \n28 | \n\n |
| \n Year ended\n December 31, 2013 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Allowance for doubtful\n accounts \n | \n \n | $ | \n134 | \n\n | \n | $ | \n8 | \n\n | \n | $ | \n133 | \n\n | \n | $ | \n9 | \n\n |
| \n Year ended\n December 31, 2012 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Allowance for doubtful\n accounts \n | \n \n | $ | \n21 | \n\n | \n | $ | \n113 | \n\n | \n | $ | \n0 | \n\n | \n | $ | \n134 | \n\n |
\n Use of\n Estimates
\nThe preparation of consolidated financial statements and\n related disclosures in accordance with GAAP and pursuant to the\n rules and regulations of the U.S. Securities and Exchange\n Commission (“SEC”) requires management to make\n estimates and assumptions that affect the reported amounts of\n assets and liabilities and disclosure of contingent assets and\n liabilities at the date of the consolidated financial statements\n and the reported amounts of revenues and expenses during the\n reporting period. Significant estimates include valuation of\n short-term investments, income taxes including uncertain tax\n provisions, revenue recognition, stock-based compensation,\n contingent liabilities from litigation, and accruals for other\n liabilities. Actual results may differ materially from those\n estimates.
\n\n Cash\n Equivalents
\nThe Company considers all highly liquid instruments purchased\n with an original or remaining maturity of less than three months at\n the date of purchase to be cash equivalents.
\nBeginning in January 2008, the Company matched 25% of the\n employee’s contribution up to $2,000 for the year.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Year ended\n December 31, | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n | \n | (In\n thousands) | \n\n | |||||||||
| \n | \n | \n | \n | |||||||||
| \n Company contribution to 401\n (k) plan \n | \n \n | $ | \n106 | \n\n | \n | $ | \n91 | \n\n | \n | $ | \n77 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
11.\n Discontinued Operations
\nDuring\n 2009, the Company sold all of its 3D product line including\n inventory, fixed assets, and intangibles and recorded gains on the\n sale of discontinued operations of $187,000 at the time of the\n sales. The consideration for the sales was $2.7 million in the form\n of cash of $320,000 and notes receivable of $2.4 million, for which\n the proceeds are being recognized when they are received. The\n Company abandoned all other 3D operations. Accordingly, the\n operations of the 3D product line were classified as discontinued\n operations, net of income tax, in the consolidated statement of\n operations for all periods presented. The assets sold consisted\n primarily of intangible assets that had no carrying value on the\n Company’s books at the time of sale. In the years ended\n December 31, 2014, 2013, and 2012 the Company recorded gains\n on sales of discontinued operations net of tax of $0, $0, and\n $153,000 respectively, from the original sale and payments on notes\n from the sale of the 3D product line.
\nAmortization of intangibles was as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Year ended\n December 31, | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n | \n | (In\n thousands) | \n\n | |||||||||
| \n Amortization of\n Intangibles \n | \n \n | $ | \n67 | \n\n | \n | $ | \n79 | \n\n | \n | $ | \n49 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Property and\n Equipment
\nProperty is stated at cost and is depreciated using the\n straight-line method over the estimated useful life of the related\n asset. The estimated useful lives are typically as\n follows:
\n\n
\n| \n | \n | \n | \n | \n |
| \n Computer equipment and\n purchased software \n | \n \n | \n | 3 years | \n\n |
| \n Machinery and\n equipment \n | \n \n | \n | 3-5 years | \n\n |
| \n Furniture and\n fixtures \n | \n \n | \n | 5 years | \n\n |
Leasehold improvements are amortized over the shorter of the\n lease term or their estimated useful life.
\n17.\n Quarterly Results of Operations\n (Unaudited)
\nThe following table presents certain consolidated statement of\n operations data for the Company’s eight most recent\n quarters:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Dec 31, \n 2014 | \n \n | \n | Sept 30, \n 2014 | \n \n | \n | June 30, \n 2014 | \n \n | \n | Mar 31, \n 2014 | \n \n | \n | Dec 31, \n 2013 | \n \n | \n | Sept 30, \n 2013 | \n \n | \n | June 30, \n 2013 | \n \n | \n | Mar 31, \n 2013 | \n \n | ||||||||
| \n | \n | |||||||||||||||||||||||||||||||
| \n | \n | (In thousands, except\n per share data) | \n\n | |||||||||||||||||||||||||||||
| \n Revenues (1) \n | \n \n | $ | \n13,619 | \n\n | \n | $ | \n12,051 | \n\n | \n | $ | \n11,831 | \n\n | \n | $ | \n15,436 | \n\n | \n | $ | \n12,067 | \n\n | \n | $ | \n11,342 | \n\n | \n | $ | \n10,201 | \n\n | \n | $ | \n13,860 | \n\n |
| \n Gross profit \n | \n \n | \n | 13,484 | \n\n | \n | \n | 11,947 | \n\n | \n | \n | 11,730 | \n\n | \n | \n | 15,316 | \n\n | \n | \n | 11,991 | \n\n | \n | \n | 11,231 | \n\n | \n | \n | 10,074 | \n\n | \n | \n | 13,712 | \n\n |
| \n Operating income \n | \n \n | \n | 1,194 | \n\n | \n | \n | 1,702 | \n\n | \n | \n | 117 | \n\n | \n | \n | 2,954 | \n\n | \n | \n | 648 | \n\n | \n | \n | 814 | \n\n | \n | \n | 448 | \n\n | \n | \n | 1,694 | \n\n |
| \n Income before provision for\n taxes \n | \n \n | \n | 1,439 | \n\n | \n | \n | 1,672 | \n\n | \n | \n | 261 | \n\n | \n | \n | 2,947 | \n\n | \n | \n | 636 | \n\n | \n | \n | 856 | \n\n | \n | \n | 476 | \n\n | \n | \n | 1,704 | \n\n |
| \n Benefit (provision) for\n income taxes \n | \n \n | \n | (422 | \n) | \n\n | \n | (599 | \n) | \n\n | \n | (92 | \n) | \n\n | \n | (1,083 | \n) | \n\n | \n | 36,767 | \n\n | \n | \n | (257 | \n) | \n\n | \n | (10 | \n) | \n\n | \n | (17 | \n) | \n
| \n Net income \n | \n \n | \n | 1,017 | \n\n | \n | \n | 1,073 | \n\n | \n | \n | 169 | \n\n | \n | \n | 1,864 | \n\n | \n | \n | 37,403 | \n\n | \n | \n | 599 | \n\n | \n | \n | 466 | \n\n | \n | \n | 1,687 | \n\n |
| \n Basic net income per share\n (2) \n | \n \n | $ | \n0.04 | \n\n | \n | $ | \n0.04 | \n\n | \n | $ | \n0.01 | \n\n | \n | $ | \n0.07 | \n\n | \n | $ | \n1.31 | \n\n | \n | $ | \n0.02 | \n\n | \n | $ | \n0.02 | \n\n | \n | $ | \n0.06 | \n\n |
| \n Shares used in calculating\n basic net income per share \n | \n \n | \n | 27,733 | \n\n | \n | \n | 28,505 | \n\n | \n | \n | 28,383 | \n\n | \n | \n | 28,370 | \n\n | \n | \n | 28,614 | \n\n | \n | \n | 28,558 | \n\n | \n | \n | 28,146 | \n\n | \n | \n | 27,424 | \n\n |
| \n Diluted net income per\n share (2) \n | \n \n | $ | \n0.04 | \n\n | \n | $ | \n0.04 | \n\n | \n | $ | \n0.01 | \n\n | \n | $ | \n0.06 | \n\n | \n | $ | \n1.26 | \n\n | \n | $ | \n0.02 | \n\n | \n | $ | \n0.02 | \n\n | \n | $ | \n0.06 | \n\n |
| \n Shares used in calculating\n diluted net income per share \n | \n \n | \n | 28,430 | \n\n | \n | \n | 29,351 | \n\n | \n | \n | 29,210 | \n\n | \n | \n | 29,382 | \n\n | \n | \n | 29,675 | \n\n | \n | \n | 29,653 | \n\n | \n | \n | 29,293 | \n\n | \n | \n | 28,294 | \n\n |
\n
\n\n (1) The Company\n typically experiences seasonally higher revenue in the first\n calendar quarter due to the reporting of holiday sales from some of\n our customers.
\n\n (2) The\n quarterly earnings per share information is calculated separately\n for each period. Therefore, the sum of such quarterly per share\n amounts may differ from the total for the year.
\n\n Research and\n Development
\nResearch and development costs are expensed as incurred. The\n Company has sometimes generated revenues from development contracts\n with commercial customers that have enabled it to accelerate its\n own product development efforts. Such development revenues have\n only partially funded the Company’s product development\n activities, and the Company generally retains ownership of the\n products developed under these arrangements. As a result, the\n Company classifies all development costs related to these contracts\n as research and development expenses.
\n\n Software\n Development Costs
\nCosts for the development of new software products and\n substantial enhancements to existing software products are expensed\n as incurred until technological feasibility has been established,\n at which time any additional costs would be capitalized. The\n Company considers technological feasibility to be established upon\n completion of a working model of the software. Because the Company\n believes its current process for developing software is essentially\n completed concurrently with the establishment of technological\n feasibility, no costs have been capitalized to date.
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | December 31, | \n\n | |||||
| \n | \n | 2014 | \n\n | \n | 2013 | \n\n | ||
| \n | \n | (In\n thousands) | \n\n | |||||
| \n Trade accounts\n receivable \n | \n \n | $ | \n2,708 | \n\n | \n | $ | \n320 | \n\n |
| \n Receivables from vendors\n and other \n | \n \n | \n | 313 | \n\n | \n | \n | 278 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Accounts and other\n receivables \n | \n \n | $ | \n3,021 | \n\n | \n | $ | \n598 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
The changes in accumulated other comprehensive income (loss)\n are included in the table below.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n Year Ended December 31, 2014 \n | \n \n | |||||||||
| \n | \n | \n \n Unrealized Gains \n\n and Losses\n on \n\n Available-for Sale \nSecurities \n \n | \n \n | \n | \n \n Foreign \n\n Currency \nItems \n | \n \n | \n | \n Total \n | \n \n | |||
| \n | \n | (In\n thousands) | \n\n | |||||||||
| \n Beginning\n balance \n | \n \n | $ | \n11 | \n\n | \n | $ | \n101 | \n\n | \n | $ | \n112 | \n\n |
| \n Other comprehensive income\n (loss) before reclassifications \n | \n \n | \n | (10 | \n) | \n\n | \n | 0 | \n\n | \n | \n | (10 | \n) | \n
| \n Amounts reclassified from\n accumulated other comprehensive income (loss) \n | \n \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Net current period other\n comprehensive income (loss) \n | \n \n | \n | (10 | \n) | \n\n | \n | 0 | \n\n | \n | \n | (10 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Ending Balance \n | \n \n | $ | \n1 | \n\n | \n | $ | \n101 | \n\n | \n | $ | \n102 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
10.\n Stockholders’ Equity
\n\n Comprehensive Income (Loss)
\nThe changes in accumulated other comprehensive income (loss)\n are included in the table below.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n Year Ended December 31, 2014 \n | \n \n | |||||||||
| \n | \n | \n \n Unrealized Gains \n\n and Losses\n on \n\n Available-for Sale \nSecurities \n \n | \n \n | \n | \n \n Foreign \n\n Currency \nItems \n | \n \n | \n | \n Total \n | \n \n | |||
| \n | \n | (In\n thousands) | \n\n | |||||||||
| \n Beginning\n balance \n | \n \n | $ | \n11 | \n\n | \n | $ | \n101 | \n\n | \n | $ | \n112 | \n\n |
| \n Other comprehensive income\n (loss) before reclassifications \n | \n \n | \n | (10 | \n) | \n\n | \n | 0 | \n\n | \n | \n | (10 | \n) | \n
| \n Amounts reclassified from\n accumulated other comprehensive income (loss) \n | \n \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Net current period other\n comprehensive income (loss) \n | \n \n | \n | (10 | \n) | \n\n | \n | 0 | \n\n | \n | \n | (10 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Ending Balance \n | \n \n | $ | \n1 | \n\n | \n | $ | \n101 | \n\n | \n | $ | \n102 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
In February 2013, the FASB ratified ASU 2013-02\n “Comprehensive Income (Topic 220): Reporting of Amounts\n Reclassified Out of Comprehensive Income” (“ASU\n 2013-02”). ASU 2013-02 requires entities to disclose\n additional information about items reclassified out of accumulated\n other comprehensive income (“AOCI”) including AOCI\n balances by component and significant items reclassified out of\n AOCI. This ASU is effective for reporting periods beginning after\n December 15, 2012, and is being applied prospectively. The\n impact was not significant on the Company’s consolidated\n financial statements.
\n\n Stock\n Repurchase Program
\nOn November 1, 2007, the Company announced its board of\n directors’ authorized the repurchase of up to $50 million of\n the Company’s common stock. In addition, on October 22,\n 2014, our board of directors authorized another $30 million under\n the share repurchase program. The Company may repurchase its stock\n for cash in the open market in accordance with applicable\n securities laws. The timing of and amount of any stock repurchase\n will depend on share price, corporate and regulatory requirements,\n economic and market conditions, and other factors. The stock\n repurchase authorization has no expiration date, does not require\n the Company to repurchase a specific number of shares, and may be\n modified, suspended, or discontinued at any time.
\nDuring the year ended December 31, 2014, the Company\n repurchased 1,527,647 shares for $15,000,000 at an average cost of\n $9.82 net of transaction costs through open market repurchases.\n There were no stock repurchases in 2013 under this stock repurchase\n program. During the year ended December 31, 2012, the Company\n repurchased 1,054,538 shares for $5,721,000 at an average cost of\n $5.43 net of transaction costs through open market repurchases.\n These amounts are classified as treasury stock on the\n Company’s consolidated balance sheet.
\n7. Long-term\n Deferred Revenue
\nLong-term deferred revenue consisted of the\n following:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | December 31, | \n\n | |||||
| \n | \n | 2014 | \n\n | \n | 2013 | \n\n | ||
| \n | \n | (In\n thousands) | \n\n | |||||
| \n Deferred revenue for Sony\n Computer Entertainment \n | \n \n | $ | \n7,051 | \n\n | \n | $ | \n12,840 | \n\n |
| \n Other deferred\n revenue \n | \n \n | \n | 776 | \n\n | \n | \n | 601 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Long-term deferred\n revenue \n | \n \n | $ | \n7,827 | \n\n | \n | $ | \n13,441 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
Deferred revenue for Sony Computer Entertainment represents\n deferred license revenue where payments have been received in\n advance of revenue recognition.
\n\n Foreign\n Currency Translation
\nThe functional currency of the Company’s foreign\n subsidiaries is U. S. dollars. Accordingly, gains and losses from\n the translation of the financial statements of the foreign\n subsidiaries and foreign currency transaction gains and losses are\n included in earnings.
\n\n Long-lived\n Assets
\nThe Company evaluates its long-lived assets for impairment\n whenever events or changes in circumstances indicate that the\n carrying amount of that asset may not be recoverable. An impairment\n loss would be recognized when the sum of the undiscounted future\n net cash flows expected to result from the use of the asset and its\n eventual disposition is less than its carrying amount. Measurement\n of an impairment loss for long-lived assets and certain\n identifiable intangible assets that management expects to hold and\n use is based on the fair value of the asset.
\n12. Income\n Taxes
\nIncome tax benefit (provisions) from continuing operations\n consisted of the following:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Years Ended December 31, \n | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n | \n | (In\n thousands) | \n\n | |||||||||
| \n Income (loss) from\n continuing operations before benefit (provision) for income\n taxes \n | \n \n | $ | \n6,319 | \n\n | \n | $ | \n3,672 | \n\n | \n | $ | \n(6,558) | \n\n |
| \n Benefit (provision) for\n income taxes \n | \n \n | \n | (2,196 | \n) | \n\n | \n | 36,483 | \n\n | \n | \n | (792 | \n) | \n
| \n Effective tax\n rate \n | \n \n | \n | 34.8 | \n% | \n\n | \n | (993.5 | \n)% | \n\n | \n | (12.1 | \n)% | \n
The 2014 provision for income tax resulted primarily from the\n decrease in deferred tax assets and foreign withholding tax\n expense. The 2013 benefit for income tax resulted primarily from\n the partial release of our valuation allowance. The 2012 provision\n for income tax resulted primarily from foreign withholding tax\n expense.
\nThe Company reported pre-tax book income (loss) from continuing\n operations of:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Years Ended December 31, | \n\n | |||||||||
| \n | \n | 2014 | \n\n | \n | 2013 | \n\n | \n | 2012 | \n\n | |||
| \n | \n | (In\n thousands) | \n\n | |||||||||
| \n Domestic \n | \n \n | $ | \n5,867 | \n\n | \n | $ | \n3,349 | \n\n | \n | $ | \n(2,175 | \n) | \n
| \n Foreign \n | \n \n | \n | 452 | \n\n | \n | \n | 323 | \n\n | \n | \n | (4,383 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n6,319 | \n\n | \n | $ | \n3,672 | \n\n | \n | $ | \n(6,558) | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n
\nThe benefit (provision) for income taxes from continuing\n operations consisted of the following:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Years Ended December 31, | \n\n | |||||||||
| \n | \n | 2014 | \n\n | \n | 2013 | \n\n | \n | 2012 | \n\n | |||
| \n | \n | (In\n thousands) | \n\n | |||||||||
| \n Current: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n United States\n federal \n | \n \n | $ | \n(218 | \n) | \n\n | $ | \n(300 | \n) | \n\n | $ | \n91 | \n\n |
| \n Foreign \n | \n \n | \n | (12 | \n) | \n\n | \n | (12 | \n) | \n\n | \n | (902 | \n) | \n
| \n State and\n local \n | \n \n | \n | (75 | \n) | \n\n | \n | (55 | \n) | \n\n | \n | 19 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total current \n | \n \n | $ | \n(305) | \n\n | \n | $ | \n(367 | \n) | \n\n | $ | \n(792 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | \n | |||||||||
| \n Deferred: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n United States\n federal \n | \n \n | \n | (2,137 | \n) | \n\n | \n | 36,190 | \n\n | \n | \n | 0 | \n\n |
| \n Foreign \n | \n \n | \n | 0 | \n\n | \n | \n | 660 | \n\n | \n | \n | 0 | \n\n |
| \n State and\n local \n | \n \n | \n | 246 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total deferred \n | \n \n | \n | (1,891 | \n) | \n\n | \n | 36,850 | \n\n | \n | \n | 0 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | $ | \n(2,196) | \n\n | \n | $ | \n36,483 | \n\n | \n | $ | \n(792 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
In 2014, 2013, and 2012 the Company’s income tax payable\n was not decreased by the tax benefit related to stock options. The\n Company includes only the direct tax effects of employee stock\n incentive plans in calculating this benefit, which is recorded to\n additional paid-in capital.
\nDeferred tax assets and liabilities are recognized for the\n temporary differences between the carrying amounts of assets and\n liabilities for financial reporting purposes and the amounts used\n for income tax purposes, tax losses, and credit carryforwards.\n Significant components of the net deferred tax assets and\n liabilities consisted of:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | December 31, | \n\n | |||||
| \n | \n | 2014 | \n\n | \n | 2013 | \n\n | ||
| \n | \n | (In\n thousands) | \n\n | |||||
| \n Deferred tax\n assets: \n | \n \n | \n | \n | \n | ||||
| \n Net operating loss\n carryforwards \n | \n \n | $ | \n20,627 | \n\n | \n | $ | \n23,652 | \n\n |
| \n State income\n taxes \n | \n \n | \n | 1 | \n\n | \n | \n | 1 | \n\n |
| \n Deferred revenue \n | \n \n | \n | 4,723 | \n\n | \n | \n | 3,588 | \n\n |
| \n Research and development\n and other credits \n | \n \n | \n | 8,898 | \n\n | \n | \n | 8,201 | \n\n |
| \n Reserves and accruals\n recognized in different periods \n | \n \n | \n | 4,803 | \n\n | \n | \n | 4,994 | \n\n |
| \n Basis difference in\n investment \n | \n \n | \n | 968 | \n\n | \n | \n | 967 | \n\n |
| \n Capitalized R&D\n expenses \n | \n \n | \n | 1,576 | \n\n | \n | \n | 1,535 | \n\n |
| \n Depreciation and\n amortization \n | \n \n | \n | 783 | \n\n | \n | \n | 887 | \n\n |
| \n Other \n | \n \n | \n | 80 | \n\n | \n | \n | 120 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total deferred tax\n assets \n | \n \n | \n | 42,459 | \n\n | \n | \n | 43,945 | \n\n |
| \n Valuation\n allowance \n | \n \n | \n | (7,663 | \n) | \n\n | \n | (7,095 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Net deferred tax\n assets \n | \n \n | $ | \n34,796 | \n\n | \n | $ | \n36,850 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
The Company accounts for deferred taxes under ASC Topic 740,\n “Income Taxes” (“ASC 740”) which involves\n weighing positive and negative evidence concerning the\n realizability of the Company’s deferred tax assets in each\n jurisdiction. As of December 31, 2014, based on its assessment\n of the realizability of its deferred tax assets, the Company\n maintains a partial valuation allowance against certain of its U.S.\n Federal, state, and foreign deferred tax assets in each\n jurisdiction. The valuation allowance increased by\n $568,000.
\n\n
\nAs of December 31, 2014, the net operating loss\n carryforwards for federal and state income tax purposes were\n approximately $57.6 million and $52.3 million, respectively. The\n federal net operating losses expire between 2028 and 2033 and the\n state net operating losses begin to expire in 2028. $9.1 million of\n the Company’s net operating losses are associated with excess\n benefits related to stock compensation, when realized the amount\n will be an increase to additional paid in capital. As of\n December 31, 2014, the Company had federal and state tax\n credit carryforwards of approximately $9.2 million and $1.1\n million, respectively, available to offset future taxable income.\n The federal credit carryforwards will expire between 2018 and 2034\n and the California tax credits will carryforward indefinitely. In\n addition, as of December 31, 2014, the Company has Canadian\n research and development credit carryforwards of $1.6 million,\n which will expire at various dates through 2034. These operating\n losses and credit carryforwards have not been reviewed by the\n relevant tax authorities and could be subject to adjustment upon\n examinations.
\nSection 382 of the Internal Revenue Code (“IRC\n Section 382”) imposes limitations on a\n corporation’s ability to utilize its net operating losses and\n credit carryforwards if it experiences an “ownership\n change” as defined by IRC Section 382. Utilization of a\n portion of the Company’s federal net operating loss\n carryforward was limited in accordance with IRC Section 382,\n due to an ownership change that occurred during 1999. This\n limitation has fully lapsed as of December 31, 2010. As of\n December 31, 2014, the Company conducted an IRC\n Section 382 analysis with respect to its net operating loss\n and credit carryforwards and determined there was no limitation.\n There can be no assurance that future issuances of the\n Company’s securities will not trigger limitations under IRC\n Section 382 which could limit utilization of these tax\n attributes.
\nFor purposes of the reconciliation between the benefit\n (provision) for income taxes at the statutory rate and the\n effective tax rate, a national U.S. 35% rate is applied as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2014 | \n\n | \n | 2013 | \n\n | \n | 2012 | \n\n | |||
| \n Federal statutory tax\n rate \n | \n \n | \n | 35.0 | \n% | \n\n | \n | 35.0 | \n% | \n\n | \n | 35.0 | \n% | \n
| \n State taxes, net of federal\n benefit \n | \n \n | \n | 0.0 | \n% | \n\n | \n | 0.1 | \n% | \n\n | \n | 2.3 | \n% | \n
| \n Foreign\n withholding \n | \n \n | \n | 3.5 | \n% | \n\n | \n | 8.2 | \n% | \n\n | \n | (13.0 | \n)% | \n
| \n Stock compensation\n expense \n | \n \n | \n | 3.8 | \n% | \n\n | \n | 2.5 | \n% | \n\n | \n | (2.6 | \n)% | \n
| \n Meals &\n entertainment \n | \n \n | \n | 0.1 | \n% | \n\n | \n | 0.3 | \n% | \n\n | \n | (0.2 | \n)% | \n
| \n Foreign rate\n differential \n | \n \n | \n | (1.1 | \n)% | \n\n | \n | (1.7 | \n)% | \n\n | \n | (2.8 | \n)% | \n
| \n Prior year true-up\n items \n | \n \n | \n | (0.2 | \n)% | \n\n | \n | 0.1 | \n% | \n\n | \n | 0.1 | \n% | \n
| \n Tax reserves \n | \n \n | \n | 0.8 | \n% | \n\n | \n | 1.3 | \n% | \n\n | \n | (0.1 | \n)% | \n
| \n Benefit of discontinued\n operations \n | \n \n | \n | 0.0 | \n% | \n\n | \n | 0.0 | \n% | \n\n | \n | 1.5 | \n% | \n
| \n Credits \n | \n \n | \n | (5.7 | \n)% | \n\n | \n | (11.0 | \n)% | \n\n | \n | 13.0 | \n% | \n
| \n Other \n | \n \n | \n | (1.4 | \n)% | \n\n | \n | 0.0 | \n% | \n\n | \n | 0.3 | \n% | \n
| \n Valuation\n allowance \n | \n \n | \n | 0.0 | \n% | \n\n | \n | (1028.3 | \n)% | \n\n | \n | (45.6 | \n)% | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Effective tax\n rate \n | \n \n | \n | 34.8 | \n% | \n\n | \n | (993.5 | \n)% | \n\n | \n | (12.1 | \n)% | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
Undistributed earnings of the Company’s foreign\n subsidiaries are considered to be indefinitely reinvested and\n accordingly, no provision for federal and state income taxes has\n been provided thereon. Upon distribution of those earnings in the\n form of dividends or otherwise, the Company would be subject to\n both U.S. income taxes (subject to an adjustment for foreign tax\n credits) and withholding taxes payable to various foreign\n countries.
\nThe Company maintains liabilities for uncertain tax positions.\n These liabilities involve considerable judgment and estimation and\n are continuously monitored by management based on the best\n information available, including changes in tax regulations, the\n outcome of relevant court cases, and other information. A\n reconciliation of the beginning and ending amount of gross\n unrecognized tax benefits is as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2014 \n Unrecognized \n Tax Benefits | \n \n | \n | 2013 \n Unrecognized \n Tax Benefits | \n \n | \n | 2012 \n Unrecognized \n Tax Benefits | \n \n | |||
| \n | \n | (In\n thousands) | \n\n | |||||||||
| \n Balance at beginning of\n year \n | \n \n | $ | \n1,634 | \n\n | \n | $ | \n628 | \n\n | \n | $ | \n628 | \n\n |
| \n Gross increases for tax\n positions of prior years \n | \n \n | \n | 0 | \n\n | \n | \n | 896 | \n\n | \n | \n | 0 | \n\n |
| \n Gross decreases for tax\n positions of prior years \n | \n \n | \n | (4 | \n) | \n\n | \n | 0 | \n\n | \n | \n | 0 | \n\n |
| \n Gross increases for tax\n positions of current year \n | \n \n | \n | 114 | \n\n | \n | \n | 110 | \n\n | \n | \n | 0 | \n\n |
| \n Settlements \n | \n \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n |
| \n Lapse of statute of\n limitations \n | \n \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Balance at end of\n year \n | \n \n | $ | \n1,744 | \n\n | \n | $ | \n1,634 | \n\n | \n | $ | \n628 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
In July 2013, the FASB ratified ASU 2013-11, “Presenting\n an Unrecognized Tax Benefit (“UTB”) When a Net\n Operating Loss Carryforward Exists” (“ASU\n 2013-11”). ASU 2013-02 provides that an UTB, or a portion\n thereof, should be presented in the financial statements as a\n reduction to a deferred tax asset for a net operating loss\n carryforward, a similar tax loss, or a tax credit carryforward,\n except to the extent that a net operating loss carryforward, a\n similar tax loss, or a tax credit carryforward is not available at\n the reporting date to settle any additional income taxes that would\n result from disallowance of a tax position, or the tax law does not\n require the entity to use, and the entity does not intend to use,\n the deferred tax asset for such purpose, then the unrecognized tax\n benefit should be presented as a liability. ASU 2013-11 was\n effective for reporting periods beginning after December 15,\n 2013, and may be applied retrospectively. The impact was not\n significant on the Company’s condensed consolidated results\n of operations and financial condition.
\nThe unrecognized tax benefits relate primarily to federal and\n state research and development credits. The Company’s policy\n is to account for interest and penalties related to uncertain tax\n positions as a component of income tax expense. As of\n December 31, 2014, the Company accrued interest or penalties\n related to uncertain tax positions in the amount of $73,000. The\n Company expects to release reserves and record a tax benefit due to\n the expiration of statutes of limitations during the next 12\n months. As of December 31, 2014, the total amount of\n unrecognized tax benefits that would affect the Company’s\n effective tax rate, if recognized, is $272,000.
\nBecause the Company has net operating loss and credit\n carryforwards, there are open statutes of limitations in which\n federal, state and foreign taxing authorities may examine the\n Company’s tax returns for all years from 1998 through the\n current period.
\nSignificant components of the net deferred tax assets and\n liabilities consisted of:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | December 31, | \n\n | |||||
| \n | \n | 2014 | \n\n | \n | 2013 | \n\n | ||
| \n | \n | (In\n thousands) | \n\n | |||||
| \n Deferred tax\n assets: \n | \n \n | \n | \n | \n | ||||
| \n Net operating loss\n carryforwards \n | \n \n | $ | \n20,627 | \n\n | \n | $ | \n23,652 | \n\n |
| \n State income\n taxes \n | \n \n | \n | 1 | \n\n | \n | \n | 1 | \n\n |
| \n Deferred revenue \n | \n \n | \n | 4,723 | \n\n | \n | \n | 3,588 | \n\n |
| \n Research and development\n and other credits \n | \n \n | \n | 8,898 | \n\n | \n | \n | 8,201 | \n\n |
| \n Reserves and accruals\n recognized in different periods \n | \n \n | \n | 4,803 | \n\n | \n | \n | 4,994 | \n\n |
| \n Basis difference in\n investment \n | \n \n | \n | 968 | \n\n | \n | \n | 967 | \n\n |
| \n Capitalized R&D\n expenses \n | \n \n | \n | 1,576 | \n\n | \n | \n | 1,535 | \n\n |
| \n Depreciation and\n amortization \n | \n \n | \n | 783 | \n\n | \n | \n | 887 | \n\n |
| \n Other \n | \n \n | \n | 80 | \n\n | \n | \n | 120 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total deferred tax\n assets \n | \n \n | \n | 42,459 | \n\n | \n | \n | 43,945 | \n\n |
| \n Valuation\n allowance \n | \n \n | \n | (7,663 | \n) | \n\n | \n | (7,095 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Net deferred tax\n assets \n | \n \n | $ | \n34,796 | \n\n | \n | $ | \n36,850 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
The following is a reconciliation of the numerators and\n denominators used in computing basic and diluted net income (loss)\n per share:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Years Ended\n December 31, | \n\n | |||||||||
| \n | \n | 2014 | \n\n | \n | 2013 | \n\n | \n | 2012 | \n\n | |||
| \n | \n | (In thousands, except per share amounts) | \n\n | |||||||||
| \n Numerator: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Income (loss) from\n continuing operations \n | \n \n | $ | \n4,123 | \n\n | \n | $ | \n40,155 | \n\n | \n | $ | \n(7,350) | \n\n |
| \n Gain from discontinued\n operations , net of tax \n | \n \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 153 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Net income (loss) used in\n computing basic and diluted net income (loss) per share \n | \n \n | $ | \n4,123 | \n\n | \n | $ | \n40,155 | \n\n | \n | $ | \n(7,197) | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | \n | |||||||||
| \n Denominator: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Shares used in computation\n of basic and diluted net income (loss) per share (weighted average\n common shares outstanding) \n | \n \n | \n | 28,246 | \n\n | \n | \n | 28,190 | \n\n | \n | \n | 27,735 | \n\n |
| \n | \n | \n | \n | |||||||||
| \n Dilutive potential common\n shares: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Restricted Stock and\n RSUs \n | \n \n | \n | 261 | \n\n | \n | \n | 343 | \n\n | \n | \n | 0 | \n\n |
| \n Stock options \n | \n \n | \n | 637 | \n\n | \n | \n | 805 | \n\n | \n | \n | 0 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Shares used in computation\n of diluted net income (loss) per share \n | \n \n | \n | 29,144 | \n\n | \n | \n | 29,338 | \n\n | \n | \n | 27,735 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | \n | |||||||||
| \n Basic net income (loss) per\n share from: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Continuing\n operations \n | \n \n | $ | \n0.15 | \n\n | \n | $ | \n1.42 | \n\n | \n | $ | \n(0.27) | \n\n |
| \n Discontinued\n operations \n | \n \n | \n | 0.00 | \n\n | \n | \n | 0.00 | \n\n | \n | \n | 0.01 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n0.15 | \n\n | \n | $ | \n1.42 | \n\n | \n | $ | \n(0.26) | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Diluted net income (loss)\n per share from: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Continuing\n operations \n | \n \n | $ | \n0.14 | \n\n | \n | $ | \n1.37 | \n\n | \n | $ | \n(0.27) | \n\n |
| \n Discontinued\n operations \n | \n \n | \n | 0.00 | \n\n | \n | \n | 0.00 | \n\n | \n | \n | 0.01 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n0.14 | \n\n | \n | $ | \n1.37 | \n\n | \n | $ | \n(0.26) | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
Minimum future lease payments obligations are as\n follows:
\n\n
\n| \n | \n | \n | \n | \n |
| \n | \n | Operating Leases | \n\n | |
| \n | \n | (In thousands) | \n\n | |
| \n 2015 \n | \n \n | \n | 993 | \n\n |
| \n 2016 \n | \n \n | \n | 829 | \n\n |
| \n 2017 \n | \n \n | \n | 865 | \n\n |
| \n 2018 \n | \n \n | \n | 972 | \n\n |
| \n 2019 \n | \n \n | \n | 843 | \n\n |
| \n Thereafter \n | \n \n | \n | 2,991 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n7,493 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
The following table presents certain consolidated statement of\n operations data for the Company’s eight most recent\n quarters:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Dec 31, \n 2014 | \n \n | \n | Sept 30, \n 2014 | \n \n | \n | June 30, \n 2014 | \n \n | \n | Mar 31, \n 2014 | \n \n | \n | Dec 31, \n 2013 | \n \n | \n | Sept 30, \n 2013 | \n \n | \n | June 30, \n 2013 | \n \n | \n | Mar 31, \n 2013 | \n \n | ||||||||
| \n | \n | |||||||||||||||||||||||||||||||
| \n | \n | (In thousands, except\n per share data) | \n\n | |||||||||||||||||||||||||||||
| \n Revenues (1) \n | \n \n | $ | \n13,619 | \n\n | \n | $ | \n12,051 | \n\n | \n | $ | \n11,831 | \n\n | \n | $ | \n15,436 | \n\n | \n | $ | \n12,067 | \n\n | \n | $ | \n11,342 | \n\n | \n | $ | \n10,201 | \n\n | \n | $ | \n13,860 | \n\n |
| \n Gross profit \n | \n \n | \n | 13,484 | \n\n | \n | \n | 11,947 | \n\n | \n | \n | 11,730 | \n\n | \n | \n | 15,316 | \n\n | \n | \n | 11,991 | \n\n | \n | \n | 11,231 | \n\n | \n | \n | 10,074 | \n\n | \n | \n | 13,712 | \n\n |
| \n Operating income \n | \n \n | \n | 1,194 | \n\n | \n | \n | 1,702 | \n\n | \n | \n | 117 | \n\n | \n | \n | 2,954 | \n\n | \n | \n | 648 | \n\n | \n | \n | 814 | \n\n | \n | \n | 448 | \n\n | \n | \n | 1,694 | \n\n |
| \n Income before provision for\n taxes \n | \n \n | \n | 1,439 | \n\n | \n | \n | 1,672 | \n\n | \n | \n | 261 | \n\n | \n | \n | 2,947 | \n\n | \n | \n | 636 | \n\n | \n | \n | 856 | \n\n | \n | \n | 476 | \n\n | \n | \n | 1,704 | \n\n |
| \n Benefit (provision) for\n income taxes \n | \n \n | \n | (422 | \n) | \n\n | \n | (599 | \n) | \n\n | \n | (92 | \n) | \n\n | \n | (1,083 | \n) | \n\n | \n | 36,767 | \n\n | \n | \n | (257 | \n) | \n\n | \n | (10 | \n) | \n\n | \n | (17 | \n) | \n
| \n Net income \n | \n \n | \n | 1,017 | \n\n | \n | \n | 1,073 | \n\n | \n | \n | 169 | \n\n | \n | \n | 1,864 | \n\n | \n | \n | 37,403 | \n\n | \n | \n | 599 | \n\n | \n | \n | 466 | \n\n | \n | \n | 1,687 | \n\n |
| \n Basic net income per share\n (2) \n | \n \n | $ | \n0.04 | \n\n | \n | $ | \n0.04 | \n\n | \n | $ | \n0.01 | \n\n | \n | $ | \n0.07 | \n\n | \n | $ | \n1.31 | \n\n | \n | $ | \n0.02 | \n\n | \n | $ | \n0.02 | \n\n | \n | $ | \n0.06 | \n\n |
| \n Shares used in calculating\n basic net income per share \n | \n \n | \n | 27,733 | \n\n | \n | \n | 28,505 | \n\n | \n | \n | 28,383 | \n\n | \n | \n | 28,370 | \n\n | \n | \n | 28,614 | \n\n | \n | \n | 28,558 | \n\n | \n | \n | 28,146 | \n\n | \n | \n | 27,424 | \n\n |
| \n Diluted net income per\n share (2) \n | \n \n | $ | \n0.04 | \n\n | \n | $ | \n0.04 | \n\n | \n | $ | \n0.01 | \n\n | \n | $ | \n0.06 | \n\n | \n | $ | \n1.26 | \n\n | \n | $ | \n0.02 | \n\n | \n | $ | \n0.02 | \n\n | \n | $ | \n0.06 | \n\n |
| \n Shares used in calculating\n diluted net income per share \n | \n \n | \n | 28,430 | \n\n | \n | \n | 29,351 | \n\n | \n | \n | 29,210 | \n\n | \n | \n | 29,382 | \n\n | \n | \n | 29,675 | \n\n | \n | \n | 29,653 | \n\n | \n | \n | 29,293 | \n\n | \n | \n | 28,294 | \n\n |
\n
\n\n (1) The Company\n typically experiences seasonally higher revenue in the first\n calendar quarter due to the reporting of holiday sales from some of\n our customers.
\n\n (2) The\n quarterly earnings per share information is calculated separately\n for each period. Therefore, the sum of such quarterly per share\n amounts may differ from the total for the year.
\nThe intrinsic value listed below is calculated as the\n difference between the market value on the date of purchase and the\n purchase price of the shares.
\n\n
\n| \n | \n | \n | \n | \n |
| \n | \n | \n \n Year Ended \n\n December 31, \n2014 \n | \n \n | |
| \n Shares purchased under\n ESPP \n | \n \n | \n | 38,298 | \n\n |
| \n Average price of shares\n purchased under ESPP \n | \n \n | $ | \n9.95 | \n\n |
| \n Intrinsic value of shares\n purchased under ESPP \n | \n \n | $ | \n107,000 | \n\n |
1.\n Significant Accounting Policies
\n\n Description\n of Business
\nImmersion Corporation (the “Company”) was\n incorporated in 1993 in California and reincorporated in Delaware\n in 1999. It is an intellectual property (“IP”) and\n software licensing company focused on the creation, design,\n development, and licensing of patented haptic innovations and\n software that allow people to use their sense of touch more fully\n when operating a wide variety of digital devices.
\n\n Principles\n of Consolidation and Basis of Presentation
\nThe consolidated financial statements include the accounts of\n Immersion Corporation and its wholly-owned subsidiaries, Immersion\n Canada Inc.; Immersion International, LLC; Immersion Medical, Inc.;\n Immersion Japan K.K.; Immersion Ltd.; Immersion Software Ireland\n Ltd.; Haptify, Inc.; and Immersion (Shanghai) Science &\n Technology Company, Ltd. All intercompany accounts, transactions,\n and balances have been eliminated in consolidation. The Company has\n prepared the accompanying consolidated financial statements in\n conformity with accounting principles generally accepted in the\n United States of America (“GAAP”).
\n\n Cash\n Equivalents
\nThe Company considers all highly liquid instruments purchased\n with an original or remaining maturity of less than three months at\n the date of purchase to be cash equivalents.
\n\n Short-term\n Investments
\nThe Company’s short-term investments consist primarily of\n U.S treasury bills and government agency securities purchased with\n an original or remaining maturity of greater than 90 days on the\n date of purchase. The Company classifies debt securities with\n readily determinable market values as\n “available-for-sale.” Even though the stated maturity\n dates of these debt securities may be one year or more beyond the\n balance sheet date, the Company has classified all debt securities\n as short-term investments as they are reasonably expected to be\n realized in cash or sold within one year. These investments are\n carried at fair market value with unrealized gains and losses\n considered to be temporary in nature reported as a separate\n component of other comprehensive income (loss) within\n stockholders’ equity.
\nThe Company recognizes an impairment charge in the consolidated\n statement of operations when a decline in value is judged to be\n other than temporary based on the specific identification method.\n Other-than-temporary impairment charges may exist when the Company\n has the intent to sell the security, will more likely than not be\n required to sell the security, or does not expect to recover the\n principal.
\n\n Property and\n Equipment
\nProperty is stated at cost and is depreciated using the\n straight-line method over the estimated useful life of the related\n asset. The estimated useful lives are typically as\n follows:
\n\n
\n| \n | \n | \n | \n | \n |
| \n Computer equipment and\n purchased software \n | \n \n | \n | 3 years | \n\n |
| \n Machinery and\n equipment \n | \n \n | \n | 3-5 years | \n\n |
| \n Furniture and\n fixtures \n | \n \n | \n | 5 years | \n\n |
Leasehold improvements are amortized over the shorter of the\n lease term or their estimated useful life.
\n\n
\n\n Intangible\n Assets
\nIntangible assets with finite useful lives are amortized and\n intangible assets with indefinite lives are not amortized but\n rather are tested at least annually for impairment.
\nThe Company has acquired patents and other intangible assets.\n Costs associated with acquired patents and other intangible assets\n are capitalized as incurred. These costs are amortized utilizing\n the straight-line method, which approximates the pattern of\n consumption over the estimated useful lives of the respective\n assets, generally ten years.
\nThe Company also internally develops and licenses IP and\n software, and when possible, it protects its IP and software with\n patents and trademarks. External patent-related costs are expensed\n as incurred and classified as general and administrative expenses\n in the consolidated statement of operations, consistent with the\n classification of internal legal costs associated with internally\n developed patents and trademarks.
\n\n Long-lived\n Assets
\nThe Company evaluates its long-lived assets for impairment\n whenever events or changes in circumstances indicate that the\n carrying amount of that asset may not be recoverable. An impairment\n loss would be recognized when the sum of the undiscounted future\n net cash flows expected to result from the use of the asset and its\n eventual disposition is less than its carrying amount. Measurement\n of an impairment loss for long-lived assets and certain\n identifiable intangible assets that management expects to hold and\n use is based on the fair value of the asset.
\n\n Revenue\n Recognition
\nThe Company recognizes revenues in accordance with applicable\n accounting standards, including ASC 605-10-S99, “Revenue\n Recognition” (“ASC 605-10-S99”); ASC 605-25,\n “Multiple Element Arrangements” (“ASC\n 605-25”); and ASC 985-605, “Software-Revenue\n Recognition” (“ASC 985-605”). The Company derives\n its revenues from three principal sources: royalty and license\n fees, development contract and service fees, and, previously,\n product sales. As described below, management judgments,\n assumptions, and estimates must be made and used in connection with\n the revenue recognized in any accounting period. Material\n differences may result in the amount and timing of revenue for any\n period based on the judgments and estimates made by management.\n Specifically, in connection with each transaction, the Company must\n evaluate whether: (i) persuasive evidence of an arrangement\n exists, (ii) delivery has occurred, (iii) the fee is\n fixed or determinable, and (iv) collectibility is probable.\n The Company applies these criteria as discussed below.
\n\n
\n| \n | • | \n\n | \n Persuasive evidence of an arrangement exists. For a\n license arrangement, the Company requires a written contract,\n signed by both the customer and the Company. For a stand-alone\n product sale, the Company requires a purchase order or other form\n of written agreement with the customer. \n | \n
| \n | • | \n\n | \n Delivery has occurred. The Company delivers software and\n product to customers physically and also delivers software\n electronically. For physical deliveries not related to software,\n the transfer terms typically include transfer of title and risk of\n loss at the Company’s shipping location. For electronic\n deliveries, delivery occurs when the Company provides the customer\n access codes or “keys” that allow the customer to take\n immediate possession of the software. \n | \n
| \n | • | \n\n | \n The fee is fixed or determinable. The Company’s\n arrangement fee is based on the use of standard payment terms which\n are those that are generally extended to the majority of customers.\n For transactions involving extended payment terms, the Company\n deems these fees not to be fixed or determinable for revenue\n recognition purposes and revenue is deferred until the fees become\n due and payable. \n | \n
| \n | • | \n\n | \n Collectibility is probable. To recognize revenue, the\n Company must judge collectibility of fees, which is done on a\n customer-by-customer basis pursuant to the Company’s credit\n review policy. The Company typically sells to customers with whom\n there is a history of successful collection. For new customers, the\n Company evaluates the customer’s financial condition and\n ability to pay. If it is determined that collectibility is not\n probable based upon the credit review process or the\n customer’s payment history, revenue is recognized when\n payment is received. \n | \n
Royalty and license revenue — The Company licenses\n its patents and software to customers in a variety of industries\n such as mobility, gaming, automotive, and medical\n devices. Certain of these are variable fee arrangements\n where the royalties earned by the Company are based on unit or\n sales volumes of the respective licensees. The Company also\n enters into fixed license fee arrangements. The terms of the\n royalty agreements generally require licensees to give notification\n of royalties due to the Company within 30 – 45 days of the\n end of the quarter during which their related sales occur. As\n the Company is unable to reliably estimate the licensees’\n sales in any given quarter to determine the royalties due to it,\n the Company recognizes royalty revenues based on royalties reported\n by licensees and when all revenue recognition criteria are met.\n Certain royalties are based upon customer shipments or revenues and\n could be subject to change and may result in out of period\n adjustments. The Company recognizes fixed license fee revenue for\n licenses when earned under the terms of the agreements, which is\n generally recognized on a straight-line basis over the expected\n term of the license.
\nDevelopment, services, and other revenue —\n Development, services, and other revenue are composed of\n engineering services (engineering services and/or development\n contracts), and in limited cases, post contract customer support\n (“PCS”). Engineering services revenues are recognized\n under the proportional performance accounting method based on\n physical completion of the work to be performed or completed\n performance method. A provision for losses on contracts is made, if\n necessary, in the period in which the loss becomes probable and can\n be reasonably estimated. Revisions in estimates are reflected in\n the period in which the conditions become known. To date, such\n losses have not been significant. Revenue from PCS is typically\n recognized over the period of the ongoing obligation, which is\n generally consistent with the contractual term.
\nMultiple element arrangements — The Company enters\n into multiple element arrangements in which customers purchase\n time-based non-exclusive licenses that cannot be resold to others,\n which include a combination of software and/or IP licenses,\n engineering services, and in limited cases PCS. For arrangements\n that are software based and include software and engineering\n services, the services are generally not essential to the\n functionality of the software, and customers may purchase\n engineering services to facilitate the adoption of the\n Company’s technology, but they may also decide to use their\n own resources or appoint other engineering service organizations to\n perform these services. For arrangements that are in substance\n subscription arrangements, the entire arrangement fee is recognized\n ratably over the contract term, subject to any limitations related\n to extended payment terms. For arrangements involving upfront fees\n for services and royalties earned by the Company based on unit or\n sales volumes of the respective licensees, and the services are\n performed ratably over the arrangement or are front-end loaded, the\n upfront fees are recognized ratably over the contract term and\n royalties based on unit or sales volume are recognized when they\n become fixed and determinable. As the Company is unable to reliably\n estimate the licensees’ sales in any given quarter to\n determine the royalties due to it, the Company recognizes per unit\n or sales volume driven royalty revenues based on royalties reported\n by licensees and when all revenue recognition criteria are\n met.
\nProduct sales — The Company recognizes revenue\n from the sale of products and the license of associated software,\n if any, and expenses all related costs of products sold, once\n delivery has occurred and customer acceptance, if required, has\n been achieved. The Company typically grants to customers a warranty\n that guarantees the products will substantially conform to the\n Company’s current specifications for generally three to\n twelve months from the delivery date pursuant to the terms of the\n arrangement. Historically, warranty-related costs have not been\n significant. As of December 31, 2013, the Company ceased\n selling products.
\n\n
\n\n Advertising
\nAdvertising costs (including obligations under cooperative\n marketing programs) are expensed as incurred and included in sales\n and marketing expense. Advertising expense was as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Year ended\n December 31, | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n | \n | (In\n thousands) | \n\n | |||||||||
| \n | \n | \n | \n | |||||||||
| \n Advertising\n expense \n | \n \n | $ | \n344 | \n\n | \n | $ | \n322 | \n\n | \n | $ | \n152 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Research and\n Development
\nResearch and development costs are expensed as incurred. The\n Company has sometimes generated revenues from development contracts\n with commercial customers that have enabled it to accelerate its\n own product development efforts. Such development revenues have\n only partially funded the Company’s product development\n activities, and the Company generally retains ownership of the\n products developed under these arrangements. As a result, the\n Company classifies all development costs related to these contracts\n as research and development expenses.
\n\n Income\n Taxes
\nThe Company uses the asset and liability method of accounting\n for income taxes. Under this method, income tax expense is\n recognized for the amount of taxes payable or refundable for the\n current year. In addition, deferred tax assets and liabilities are\n recognized for the expected future tax consequences of temporary\n differences between the financial reporting and tax bases of assets\n and liabilities, and for operating losses and tax credit\n carryforwards. Valuation allowances are established when necessary\n to reduce deferred tax assets to the amount expected to be realized\n and are reversed at such time that realization is believed to be\n more likely than not.
\n\n Software\n Development Costs
\nCosts for the development of new software products and\n substantial enhancements to existing software products are expensed\n as incurred until technological feasibility has been established,\n at which time any additional costs would be capitalized. The\n Company considers technological feasibility to be established upon\n completion of a working model of the software. Because the Company\n believes its current process for developing software is essentially\n completed concurrently with the establishment of technological\n feasibility, no costs have been capitalized to date.
\n\n Stock-based\n Compensation
\nStock-based compensation cost is measured at the grant date\n based on the fair value of the award and is recognized as expense\n on a straight-line basis over the requisite service period, which\n is the vesting period. See Note 9 for further information regarding\n the Company’s stock-based compensation assumptions and\n expenses.
\n\n Comprehensive Income (Loss)
\nComprehensive income (loss) includes net income (loss) as well\n as other items of comprehensive income or loss. The Company’s\n other comprehensive income (loss) consists of foreign currency\n translation adjustments and unrealized gains and losses on\n available-for-sale securities, net of tax.
\n\n
\n\n Use of\n Estimates
\nThe preparation of consolidated financial statements and\n related disclosures in accordance with GAAP and pursuant to the\n rules and regulations of the U.S. Securities and Exchange\n Commission (“SEC”) requires management to make\n estimates and assumptions that affect the reported amounts of\n assets and liabilities and disclosure of contingent assets and\n liabilities at the date of the consolidated financial statements\n and the reported amounts of revenues and expenses during the\n reporting period. Significant estimates include valuation of\n short-term investments, income taxes including uncertain tax\n provisions, revenue recognition, stock-based compensation,\n contingent liabilities from litigation, and accruals for other\n liabilities. Actual results may differ materially from those\n estimates.
\n\n Concentration of Credit Risks
\nFinancial instruments that potentially subject the Company to a\n concentration of credit risk principally consist of cash, cash\n equivalents, short term investments, and accounts receivable. The\n Company invests primarily in money market accounts and highly\n liquid debt instruments purchased with an original or remaining\n maturity of greater than 90 days on the date of purchase. Deposits\n held with banks may exceed the amount of insurance provided on such\n deposits. Generally, these deposits may be redeemed upon demand.\n The Company licenses technology primarily to companies in North\n America, Europe, and Asia. To reduce credit risk, management\n performs periodic credit evaluations of its customers’\n financial condition. The Company maintains reserves for estimated\n potential credit losses, but historically has not experienced any\n significant losses related to individual customers or groups of\n customers in any particular industry or geographic area.
\n\n Certain\n Significant Risks and Uncertainties
\nThe Company operates in multiple industries and, accordingly,\n can be affected by a variety of factors. For example, management of\n the Company believes that changes in any of the following areas\n could have a negative effect on the Company in terms of its future\n financial position and results of operations: the mix of revenues;\n the loss of significant customers; fundamental changes in the\n technologies underlying the Company’s and its\n licensees’ products; market acceptance of the Company’s\n and its licensees’ products under development; development of\n sales channels; litigation or other claims in which the Company is\n involved; the ability to successfully assert its patent rights\n against others; the impact of changing economic conditions; the\n hiring, training, and retention of key employees; successful and\n timely completion of product and technology development efforts;\n and new product or technology introductions by\n competitors.
\n\n Fair Value\n of Financial Instruments
\nFinancial instruments consist primarily of cash equivalents,\n short-term investments, accounts receivable and accounts payable.\n Cash equivalents and short term investments are stated at fair\n value based on quoted market prices, broker or dealer quotations,\n or alternative pricing sources with reasonable levels of price\n transparency. The recorded cost of accounts receivable and accounts\n payable approximate the fair value of the respective assets and\n liabilities.
\n\n Foreign\n Currency Translation
\nThe functional currency of the Company’s foreign\n subsidiaries is U. S. dollars. Accordingly, gains and losses from\n the translation of the financial statements of the foreign\n subsidiaries and foreign currency transaction gains and losses are\n included in earnings.
\n\n
\n\n Recent\n Accounting Pronouncements
\nIn May 2014, the Financial Accounting Standards Board\n (“FASB”) issued Accounting Standards Update\n (“ASU”) No. 2014-09 “Revenue from Contracts\n with Customers: Topic 606” (“ASU 2014-09”) which\n will supersede the current revenue recognition requirements in\n Topic 605, Revenue Recognition, and most industry-specific\n guidance. The core principle of ASU 2014-09 is that an entity\n should recognize revenue to depict the transfer of promised goods\n or services to customers in an amount that reflects the\n consideration to which the entity expects to be entitled in\n exchange for those goods or services. Further, the guidance\n requires improved disclosures to help users of financial statements\n better understand the nature, amount, timing, and uncertainty of\n revenue that is recognized. ASU 2014-09 is effective for reporting\n periods beginning after December 15, 2016, and permits\n companies to either apply the requirements retrospectively to all\n prior periods presented, or apply the requirements in the year of\n adoption, through a cumulative adjustment. The Company is\n required to adopt ASU 2014-09 as of January 1, 2017, and is in\n the process of determining the method of adoption and evaluating\n the impact on its consolidated financial statements.
\n9.\n Stock-based Compensation
\n \nThe Company’s equity incentive program is a long-term\n retention program that is intended to attract, retain, and provide\n incentives for talented employees, consultants, officers, and\n directors and to align stockholder and employee interests. The\n Company may grant options, stock appreciation rights, restricted\n stock, restricted stock units (“RSUs”), performance\n shares, performance units, and other stock-based or cash-based\n awards to employees, officers, directors, and consultants. Under\n these programs, stock options may be granted at prices not less\n than the fair market value on the date of grant for stock options.\n These options generally vest over 4 years and expire from 5 to\n 10 years from the date of grant. Restricted stock generally\n vests over one year. RSUs generally vest over 3 years. Awards\n granted other than an option or stock appreciation right shall\n reduce the common stock shares available for grant by 1.75 shares\n for every share issued.
\n\n
\n| \n | \n | \n | \n | \n |
| \n | \n | December 31, | \n\n | |
| \n | \n | \n 2014 \n | \n \n | |
| \n Common stock shares\n available for grant \n | \n \n | \n | 2,247,565 | \n\n |
| \n Common stock options\n outstanding \n | \n \n | \n | 3,536,157 | \n\n |
| \n Restricted stock awards\n outstanding \n | \n \n | \n | 35,364 | \n\n |
| \n Restricted stock units\n outstanding \n | \n \n | \n | 564,891 | \n\n |
\n
\n\n Employee\n Stock Purchase Plan
\nThe Company has an Employee Stock Purchase Plan\n (“ESPP”). Under the ESPP, eligible employees may\n purchase common stock through payroll deductions at a purchase\n price of 85% of the lower of the fair market value of the\n Company’s stock at the beginning of the offering period or\n the purchase date. Participants may not purchase more than\n 2,000 shares in a six-month offering period or purchase stock\n having a value greater than $25,000 in any calendar year as\n measured at the beginning of the offering period. A total of\n 1,000,000 shares of common stock have been reserved for\n issuance under the ESPP. As of December 31, 2014, 557,738\n shares had been purchased since the inception of the ESPP in 1999.\n Under ASC 718-10, the ESPP is considered a compensatory plan and\n the Company is required to recognize compensation cost related to\n the fair value of the award purchased under the ESPP. Shares\n purchased under the ESPP for the year ended December 31, 2014\n are listed below. Shares purchased under the ESPP for the year\n ended December 31, 2013 are 36,921. The intrinsic value listed\n below is calculated as the difference between the market value on\n the date of purchase and the purchase price of the\n shares.
\n\n
\n| \n | \n | \n | \n | \n |
| \n | \n | \n \n Year Ended \n\n December 31, \n2014 \n | \n \n | |
| \n Shares purchased under\n ESPP \n | \n \n | \n | 38,298 | \n\n |
| \n Average price of shares\n purchased under ESPP \n | \n \n | $ | \n9.95 | \n\n |
| \n Intrinsic value of shares\n purchased under ESPP \n | \n \n | $ | \n107,000 | \n\n |
\n Summary of\n Standard Stock Options
\nThe following table sets forth the summary of option activity\n under the Company’s stock option plans for the years ended\n December 31, 2014, 2013, and 2012:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Number \n of\n Shares | \n \n | \n | Weighted \n Average \n Exercise Price | \n \n | \n | Weighted \n Average \n Fair Value \n Of Options \n Granted | \n \n | \n | Aggregate \n Intrinsic \n Value \n of\n Options \n Exercised \n (In thousands) | \n \n | ||||
| \n | \n | \n | \n | \n | ||||||||||||
| \n Outstanding at\n January 1, 2012 \n | \n \n | \n | 3,267,838 | \n\n | \n | $ | \n6.61 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Granted \n | \n \n | \n | 425,150 | \n\n | \n | \n | 6.10 | \n\n | \n | $ | \n3.35 | \n\n | \n | \n | \n | \n |
| \n Exercised \n | \n \n | \n | (231,403 | \n) | \n\n | \n | 4.52 | \n\n | \n | \n | \n | \n | \n | $ | \n443 | \n\n |
| \n Forfeited \n | \n \n | \n | (47,959 | \n) | \n\n | \n | 5.89 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Expired \n | \n \n | \n | (257,995 | \n) | \n\n | \n | 7.32 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Outstanding at\n December 31, 2012 \n | \n \n | \n | 3,155,631 | \n\n | \n | \n | 6.65 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Granted \n | \n \n | \n | 1,058,700 | \n\n | \n | \n | 10.20 | \n\n | \n | \n | 5.63 | \n\n | \n | \n | \n | \n |
| \n Exercised \n | \n \n | \n | (956,633 | \n) | \n\n | \n | 6.68 | \n\n | \n | \n | \n | \n | \n | \n | 5,774 | \n\n |
| \n Forfeited \n | \n \n | \n | (10,531 | \n) | \n\n | \n | 8.24 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Expired \n | \n \n | \n | (20,000 | \n) | \n\n | \n | 9.01 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Outstanding at\n December 31, 2013 \n | \n \n | \n | 3,227,167 | \n\n | \n | \n | 7.78 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Granted \n | \n \n | \n | 604,620 | \n\n | \n | \n | 10.32 | \n\n | \n | \n | 4.93 | \n\n | \n | \n | \n | \n |
| \n Exercised \n | \n \n | \n | (205,744 | \n) | \n\n | \n | 6.34 | \n\n | \n | \n | \n | \n | \n | \n | 1,125 | \n\n |
| \n Forfeited \n | \n \n | \n | (102,454 | \n) | \n\n | \n | 7.20 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Expired \n | \n \n | \n | (37,432 | \n) | \n\n | \n | 10.19 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Outstanding at\n December 31, 2014 \n | \n \n | \n | 3,486,157 | \n\n | \n | \n | 8.30 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
\nThe aggregate intrinsic value is calculated as the difference\n between the exercise price of the underlying awards and the quoted\n price of the Company’s common stock for the options that were\n in-the-money.
\nInformation regarding standard stock options outstanding at\n December 31, 2014, 2013, and 2012 is summarized\n below:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Number \n of \n Shares | \n \n | \n | Weighted \n Average \n Exercise \n Price | \n \n | \n | Weighted \n Average \n Remaining \n Contractual \n Life\n (years) | \n \n | \n | Aggregate \n Intrinsic \n Value \n (In millions) | \n \n | ||||
| \n December 31,\n 2012 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Options\n outstanding \n | \n \n | \n | 3,155,631 | \n\n | \n | $ | \n6.65 | \n\n | \n | \n | 5.24 | \n\n | \n | $ | \n3.5 | \n\n |
| \n Options vested and expected\n to vest using estimated forfeiture rates \n | \n \n | \n | 3,019,979 | \n\n | \n | \n | 6.67 | \n\n | \n | \n | 5.17 | \n\n | \n | \n | 3.4 | \n\n |
| \n Options\n exercisable \n | \n \n | \n | 2,329,987 | \n\n | \n | \n | 6.91 | \n\n | \n | \n | 4.69 | \n\n | \n | \n | 2.5 | \n\n |
| \n | \n | \n | \n | \n | ||||||||||||
| \n December 31,\n 2013 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Options\n outstanding \n | \n \n | \n | 3,227,167 | \n\n | \n | $ | \n7.78 | \n\n | \n | \n | 5.46 | \n\n | \n | $ | \n9.9 | \n\n |
| \n Options vested and expected\n to vest using estimated forfeiture rates \n | \n \n | \n | 2,994,044 | \n\n | \n | \n | 7.61 | \n\n | \n | \n | 5.41 | \n\n | \n | \n | 9.6 | \n\n |
| \n Options\n exercisable \n | \n \n | \n | 1,774,546 | \n\n | \n | \n | 6.67 | \n\n | \n | \n | 4.95 | \n\n | \n | \n | 7.5 | \n\n |
| \n | \n | \n | \n | \n | ||||||||||||
| \n December 31,\n 2014 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Options\n outstanding \n | \n \n | \n | 3,486,157 | \n\n | \n | $ | \n8.30 | \n\n | \n | \n | 4.85 | \n\n | \n | $ | \n6.6 | \n\n |
| \n Options vested and expected\n to vest using estimated forfeiture rates \n | \n \n | \n | 3,319,308 | \n\n | \n | \n | 8.21 | \n\n | \n | \n | 4.80 | \n\n | \n | \n | 6.6 | \n\n |
| \n Options\n exercisable \n | \n \n | \n | 2,023,024 | \n\n | \n | \n | 7.18 | \n\n | \n | \n | 4.26 | \n\n | \n | \n | 6.0 | \n\n |
Additional information regarding standard options outstanding\n as of December 31, 2014 is as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Options\n Outstanding | \n\n | \n | Options\n Exercisable | \n\n | ||||||||||||||
| \n Range of \nExercise \n\n Prices \n | \n \n | Number \n Outstanding | \n \n | \n | Weighted \n Average \n Remaining \n Contractual \n Life\n (Years) | \n \n | \n | Weighted \n Average \n Exercise \n Price | \n \n | \n | Number \n Exercisable | \n \n | \n | Weighted \n Average \n Exercise \n Price | \n \n | |||||
| \n $ 2.70 -\n $3.81 \n | \n \n | \n | 20,297 | \n\n | \n | \n | 4.21 | \n\n | \n | $ | \n2.88 | \n\n | \n | \n | 20,297 | \n\n | \n | $ | \n2.88 | \n\n |
| \n 3.85 - 3.85 \n | \n \n | \n | 600,000 | \n\n | \n | \n | 4.87 | \n\n | \n | \n | 3.85 | \n\n | \n | \n | 600,000 | \n\n | \n | \n | 3.85 | \n\n |
| \n 4.24 - 6.12 \n | \n \n | \n | 578,769 | \n\n | \n | \n | 4.09 | \n\n | \n | \n | 5.86 | \n\n | \n | \n | 467,289 | \n\n | \n | \n | 5.83 | \n\n |
| \n 6.23 - 8.61 \n | \n \n | \n | 453,931 | \n\n | \n | \n | 4.39 | \n\n | \n | \n | 7.44 | \n\n | \n | \n | 366,187 | \n\n | \n | \n | 7.43 | \n\n |
| \n 8.71 - 9.20 \n | \n \n | \n | 315,030 | \n\n | \n | \n | 5.47 | \n\n | \n | \n | 9.16 | \n\n | \n | \n | 101,572 | \n\n | \n | \n | 9.10 | \n\n |
| \n 9.53 - 9.53 \n | \n \n | \n | 850,000 | \n\n | \n | \n | 5.18 | \n\n | \n | \n | 9.53 | \n\n | \n | \n | 229,374 | \n\n | \n | \n | 9.53 | \n\n |
| \n 9.65 - 13.61 \n | \n \n | \n | 355,130 | \n\n | \n | \n | 6.07 | \n\n | \n | \n | 11.64 | \n\n | \n | \n | 18,218 | \n\n | \n | \n | 12.58 | \n\n |
| \n 13.65 -\n 14.80 \n | \n \n | \n | 203,000 | \n\n | \n | \n | 4.80 | \n\n | \n | \n | 14.15 | \n\n | \n | \n | 110,087 | \n\n | \n | \n | 14.31 | \n\n |
| \n 15.12 -\n 15.12 \n | \n \n | \n | 10,000 | \n\n | \n | \n | 2.62 | \n\n | \n | \n | 15.12 | \n\n | \n | \n | 10,000 | \n\n | \n | \n | 15.12 | \n\n |
| \n 16.57 -\n 16.57 \n | \n \n | \n | 100,000 | \n\n | \n | \n | 2.74 | \n\n | \n | \n | 16.57 | \n\n | \n | \n | 100,000 | \n\n | \n | \n | 16.57 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
| \n $2.70 - $16.57 \n | \n \n | \n | 3,486,157 | \n\n | \n | \n | 4.85 | \n\n | \n | $ | \n8.30 | \n\n | \n | \n | 2,023,024 | \n\n | \n | $ | \n7.18 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
\n
\n\n Summary of\n Market Condition Based Stock Options
\nIn 2014 the Company began granting options that are subject to\n both time-based vesting and a market condition. For these options,\n the closing price of the Company stock must exceed a certain level\n for a number of trading days within a specified timeframe or the\n options will be cancelled before the seven year life of the\n options. The following table sets forth the summary of the\n market-based option activity under the Company’s stock option\n plans for the year ended December 31, 2014:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Number \n of \n Shares | \n \n | \n | Weighted \n Average \n Exercise \n Price | \n \n | \n | Weighted \n Average \n Fair Value \n Of Options \n \n Granted | \n \n | \n | Aggregate \n Intrinsic \n Value \n of\n Options \n Exercised \n (In thousands) | \n \n | ||||
| \n Outstanding at\n January 1, 2014 \n | \n \n | \n | 0 | \n\n | \n | $ | \n0.00 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Granted \n | \n \n | \n | 50,000 | \n\n | \n | \n | 11.94 | \n\n | \n | \n | 5.71 | \n\n | \n | \n | \n | \n |
| \n Exercised \n | \n \n | \n | 0 | \n\n | \n | \n | 0.00 | \n\n | \n | \n | \n | \n | \n | \n | 0 | \n\n |
| \n Forfeited \n | \n \n | \n | 0 | \n\n | \n | \n | 0.00 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Expired \n | \n \n | \n | 0 | \n\n | \n | \n | 0.00 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Outstanding at\n December 31, 2014 \n | \n \n | \n | 50,000 | \n\n | \n | \n | 11.94 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
The aggregate intrinsic value is calculated as the difference\n between the exercise price of the underlying awards and the quoted\n price of the Company’s common stock for the options that were\n in-the-money.
\nInformation regarding these market condition based stock\n options outstanding at December 31, 2014 is summarized\n below:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Number of \n \n Shares | \n \n | \n | Weighted \n Average \n Exercise \n Price | \n \n | \n | Weighted \n Average \n Remaining \n Contractual \n Life (years) \n | \n \n | \n | Aggregate \n Intrinsic \n Value \n (In millions) | \n \n | ||||
| \n December 31,\n 2014 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Options\n outstanding \n | \n \n | \n | 50,000 | \n\n | \n | $ | \n11.94 | \n\n | \n | \n | 6.15 | \n\n | \n | $ | \n0.0 | \n\n |
| \n Options vested and expected\n to vest using estimated forfeiture rates \n | \n \n | \n | 45,430 | \n\n | \n | \n | 11.94 | \n\n | \n | \n | 6.15 | \n\n | \n | \n | 0.0 | \n\n |
| \n Options\n exercisable \n | \n \n | \n | 0 | \n\n | \n | \n | 0.00 | \n\n | \n | \n | 0.00 | \n\n | \n | \n | 0.0 | \n\n |
Additional information regarding market condition based stock\n options outstanding as of December 31, 2014 is as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Options\n Outstanding | \n\n | \n | Options\n Exercisable | \n\n | ||||||||||||||
| \n Range of \nExercise \n\n Prices \n | \n \n | Number \n Outstanding | \n \n | \n | Weighted \n Average \n Remaining \n Contractual \n Life\n (Years) | \n \n | \n | Weighted \n Average \n Exercise \n Price | \n \n | \n | Number \n Exercisable | \n \n | \n | Weighted \n Average \n Exercise \n Price | \n \n | |||||
| \n $ 11.94 -\n $11.94 \n | \n \n | \n | 50,000 | \n\n | \n | \n | 6.15 | \n\n | \n | $ | \n11.94 | \n\n | \n | \n | 0 | \n\n | \n | $ | \n0.00 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
\n
\nSummary of Restricted\n Stock Units
\n\n RSU activity\n for the years ended December 31, 2014, 2013, and 2012 was as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Number \n \n of Shares | \n \n | \n | Weighted \n Average \n Grant Date \n Fair Value | \n \n | \n | Fair\n Value \n of Released \n RSU’s \n \n (In thousands) | \n \n | |||
| \n Outstanding at\n January 1, 2012 \n | \n \n | \n | 407,765 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Awarded \n | \n \n | \n | 555,911 | \n\n | \n | $ | \n6.64 | \n\n | \n | \n | \n | \n |
| \n Released \n | \n \n | \n | (203,519 | \n) | \n\n | \n | \n | \n | \n | $ | \n1,128 | \n\n |
| \n Forfeited \n | \n \n | \n | (51,506 | \n) | \n\n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Outstanding at\n December 31, 2012 \n | \n \n | \n | 708,651 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Awarded \n | \n \n | \n | 294,150 | \n\n | \n | \n | 7.12 | \n\n | \n | \n | \n | \n |
| \n Released \n | \n \n | \n | (303,882 | \n) | \n\n | \n | \n | \n | \n | \n | 2,806 | \n\n |
| \n Forfeited \n | \n \n | \n | (30,863 | \n) | \n\n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Outstanding at\n December 31, 2013 \n | \n \n | \n | 668,056 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Awarded \n | \n \n | \n | 265,630 | \n\n | \n | \n | 11.35 | \n\n | \n | \n | \n | \n |
| \n Released \n | \n \n | \n | (317,970 | \n) | \n\n | \n | \n | \n | \n | \n | 3,491 | \n\n |
| \n Forfeited \n | \n \n | \n | (50,825 | \n) | \n\n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Outstanding at\n December 31, 2014 \n | \n \n | \n | 564,891 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n Information\n regarding RSU’s at December 31, 2014, 2013, and 2012 is\n summarized below:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Number of \n \n Shares | \n \n | \n | Weighted \n Average \n Remaining \n Contractual \n Life (years) \n | \n \n | \n | Aggregate \n Intrinsic \n Value \n \n (In millions) | \n \n | \n | Fair\n Value \n (In millions) | \n \n | ||||
| \n December 31,\n 2012 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n RSUs outstanding \n | \n \n | \n | 708,651 | \n\n | \n | \n | 1.09 | \n\n | \n | $ | \n4.9 | \n\n | \n | $ | \n4.9 | \n\n |
| \n RSUs vested and expected to\n vest using estimated forfeiture rates \n | \n \n | \n | 588,170 | \n\n | \n | \n | 1.05 | \n\n | \n | $ | \n4.0 | \n\n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | ||||||||||||
| \n December 31,\n 2013 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n RSUs outstanding \n | \n \n | \n | 668,056 | \n\n | \n | \n | 0.91 | \n\n | \n | $ | \n6.9 | \n\n | \n | $ | \n6.9 | \n\n |
| \n RSUs vested and expected to\n vest using estimated forfeiture rates \n | \n \n | \n | 583,711 | \n\n | \n | \n | 0.89 | \n\n | \n | $ | \n6.1 | \n\n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | ||||||||||||
| \n December 31,\n 2014 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n RSUs outstanding \n | \n \n | \n | 564,891 | \n\n | \n | \n | 0.84 | \n\n | \n | $ | \n5.3 | \n\n | \n | $ | \n5.3 | \n\n |
| \n RSUs vested and expected to\n vest using estimated forfeiture rates \n | \n \n | \n | 502,411 | \n\n | \n | \n | 0.80 | \n\n | \n | $ | \n4.8 | \n\n | \n | \n | \n | \n |
\n The aggregate\n intrinsic value is calculated as the market value as of the end of\n the reporting period.
\n\n
\n\n Summary of\n Restricted Stock Awards
\nRestricted stock award activity for the years ended\n December 31, 2014, 2013, and 2012 was as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Number \n \n of Shares | \n \n | \n | Weighted \n Average \n Grant Date \n Fair\n Value | \n \n | \n | Total \n Fair \n Value\n of \n Awards \n Released \n (In thousands) | \n \n | |||
| \n Outstanding at\n January 1, 2012 \n | \n \n | \n | 18,000 | \n\n | \n | $ | \n6.61 | \n\n | \n | \n | \n | \n |
| \n Awarded \n | \n \n | \n | 57,750 | \n\n | \n | \n | 5.70 | \n\n | \n | \n | \n | \n |
| \n Released \n | \n \n | \n | (31,750 | \n) | \n\n | \n | 6.72 | \n\n | \n | $ | \n171 | \n\n |
| \n Forfeited \n | \n \n | \n | 0 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Outstanding at\n December 31, 2012 \n | \n \n | \n | 44,000 | \n\n | \n | \n | 5.34 | \n\n | \n | \n | \n | \n |
| \n Awarded \n | \n \n | \n | 44,000 | \n\n | \n | \n | 14.09 | \n\n | \n | \n | \n | \n |
| \n Released \n | \n \n | \n | (44,000 | \n) | \n\n | \n | 5.34 | \n\n | \n | \n | 676 | \n\n |
| \n Forfeited \n | \n \n | \n | 0 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Outstanding at\n December 31, 2013 \n | \n \n | \n | 44,000 | \n\n | \n | \n | 14.09 | \n\n | \n | \n | \n | \n |
| \n Awarded \n | \n \n | \n | 35,364 | \n\n | \n | \n | 10.97 | \n\n | \n | \n | \n | \n |
| \n Released \n | \n \n | \n | (44,000 | \n) | \n\n | \n | 14.09 | \n\n | \n | \n | 483 | \n\n |
| \n Forfeited \n | \n \n | \n | 0 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Outstanding at\n December 31, 2014 \n | \n \n | \n | 35,364 | \n\n | \n | \n | 10.97 | \n\n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n Stock-based\n Compensation
\nValuation and amortization methods — The Company\n uses the Black-Scholes-Merton option pricing model\n (“Black-Scholes model”), single-option approach to\n determine the fair value of standard stock options and ESPP shares.\n All share-based payment awards are amortized on a straight-line\n basis over the requisite service periods of the awards, which are\n generally the vesting periods. Stock-based compensation expense\n recognized at fair value includes the impact of estimated\n forfeitures. The Company estimates future forfeitures at the date\n of grant and revises the estimates if necessary, in subsequent\n periods if actual forfeitures differ from these estimates. The\n determination of the fair value of share-based payment awards on\n the date of grant using an option pricing model is affected by the\n Company’s stock price as well as assumptions regarding a\n number of complex and subjective variables. These variables include\n actual and projected employee stock option exercise behaviors that\n impact the expected term, the Company’s expected stock price\n volatility over the term of the awards, risk-free interest rate,\n and expected dividends.
\nExpected term — The Company estimates the expected\n term of options granted by calculating the average term from the\n Company’s historical stock option exercise experience. The\n expected term of ESPP shares is the length of the offering period.\n The Company used the simplified method approved by the SEC to\n determine the expected term for options granted prior to\n December 31, 2007.
\nExpected volatility — The Company estimates the\n volatility of its common stock taking into consideration its\n historical stock price movement and its expected future stock price\n trends based on known or anticipated events.
\nRisk-free interest rate — The Company bases the\n risk-free interest rate that it uses in the option pricing model on\n U.S. Treasury zero-coupon issues with remaining terms similar to\n the expected term on the options.
\n\n
\nExpected dividend — The Company does not\n anticipate paying any cash dividends in the foreseeable future and\n therefore uses an expected dividend yield of zero in the\n option-pricing model.
\nForfeitures — The Company is required to estimate\n future forfeitures at the time of grant and revise those estimates\n in subsequent periods if actual forfeitures differ from those\n estimates. The Company uses historical data to estimate pre-vesting\n option forfeitures and records stock-based compensation expense\n only for those awards that are expected to vest.
\nThe Company uses the Monte-Carlo Simulation model to value the\n stock options with a market condition. Valuation techniques such as\n a Monte-Carlo Simulation model have been developed to value\n path-dependent awards. The Monte-Carlo Simulation model is a\n generally accepted statistical technique used, in this instance, to\n simulate a range of future stock prices for the Company.
\nThe assumptions used to value option grants under the\n Company’s stock plans are as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Standard Stock Options | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n Expected life (in\n years) \n | \n \n | \n | 4.7 | \n\n | \n | \n | 4.9 | \n\n | \n | \n | 4.5 | \n\n |
| \n Interest rate \n | \n \n | \n | 1.4 | \n% | \n\n | \n | 0.8 | \n% | \n\n | \n | 0.7 | \n% | \n
| \n Volatility \n | \n \n | \n | 57 | \n% | \n\n | \n | 70 | \n% | \n\n | \n | 70 | \n% | \n
| \n Dividend yield \n | \n \n | \n | 0.0 | \n% | \n\n | \n | 0.0 | \n% | \n\n | \n | 0.0 | \n% | \n
\n
\n| \n | \n | \n | \n | \n |
| \n | \n | Market Condition Based Stock Options | \n\n | |
| \n | \n | \n 2014 \n | \n \n | |
| \n Expected life (in\n years) \n | \n \n | \n | 7.0 | \n\n |
| \n Interest rate \n | \n \n | \n | 2.2 | \n% | \n
| \n Volatility \n | \n \n | \n | 66 | \n% | \n
| \n Dividend yield \n | \n \n | \n | 0.0 | \n% | \n
\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Employee Stock Purchase Plan | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n Expected life (in\n years) \n | \n \n | \n | 0.5 | \n\n | \n | \n | 0.5 | \n\n | \n | \n | 0.5 | \n\n |
| \n Interest rate \n | \n \n | \n | 0.1 | \n% | \n\n | \n | 0.1 | \n% | \n\n | \n | 0.1 | \n% | \n
| \n Volatility \n | \n \n | \n | 43 | \n% | \n\n | \n | 67 | \n% | \n\n | \n | 62 | \n% | \n
| \n Dividend yield \n | \n \n | \n | 0.0 | \n% | \n\n | \n | 0.0 | \n% | \n\n | \n | 0.0 | \n% | \n
Total stock-based compensation recognized in the consolidated\n statements of operations is as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n Year Ended December 31, \n | \n \n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n \n Income\n Statement Classifications \n | \n \n | (In\n thousands) | \n\n | |||||||||
| \n | \n | \n | \n | |||||||||
| \n Sales and\n marketing \n | \n \n | $ | \n1,117 | \n\n | \n | $ | \n747 | \n\n | \n | $ | \n547 | \n\n |
| \n Research and\n development \n | \n \n | \n | 1,267 | \n\n | \n | \n | 1,040 | \n\n | \n | \n | 756 | \n\n |
| \n General and\n administrative \n | \n \n | \n | 2,911 | \n\n | \n | \n | 2,857 | \n\n | \n | \n | 1,843 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n5,295 | \n\n | \n | $ | \n4,644 | \n\n | \n | $ | \n3,146 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n
\nAs of December 31, 2014, there was $7.4 million of\n unrecognized compensation cost, adjusted for estimated forfeitures,\n related to non-vested stock options, restricted stock awards and\n RSU’s granted to the Company’s employees and directors.\n This cost will be recognized over an estimated weighted-average\n period of approximately 2.95 years for standard options, 3.17 years\n for market condition based options, 0.43 years for restricted stock\n awards and 1.41 years for RSU’s. Total unrecognized\n compensation cost will be adjusted for future changes in estimated\n forfeitures.
\n3. Accounts\n and Other Receivables
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | December 31, | \n\n | |||||
| \n | \n | 2014 | \n\n | \n | 2013 | \n\n | ||
| \n | \n | (In\n thousands) | \n\n | |||||
| \n Trade accounts\n receivable \n | \n \n | $ | \n2,708 | \n\n | \n | $ | \n320 | \n\n |
| \n Receivables from vendors\n and other \n | \n \n | \n | 313 | \n\n | \n | \n | 278 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Accounts and other\n receivables \n | \n \n | $ | \n3,021 | \n\n | \n | $ | \n598 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Recent\n Accounting Pronouncements
\nIn May 2014, the Financial Accounting Standards Board\n (“FASB”) issued Accounting Standards Update\n (“ASU”) No. 2014-09 “Revenue from Contracts\n with Customers: Topic 606” (“ASU 2014-09”) which\n will supersede the current revenue recognition requirements in\n Topic 605, Revenue Recognition, and most industry-specific\n guidance. The core principle of ASU 2014-09 is that an entity\n should recognize revenue to depict the transfer of promised goods\n or services to customers in an amount that reflects the\n consideration to which the entity expects to be entitled in\n exchange for those goods or services. Further, the guidance\n requires improved disclosures to help users of financial statements\n better understand the nature, amount, timing, and uncertainty of\n revenue that is recognized. ASU 2014-09 is effective for reporting\n periods beginning after December 15, 2016, and permits\n companies to either apply the requirements retrospectively to all\n prior periods presented, or apply the requirements in the year of\n adoption, through a cumulative adjustment. The Company is\n required to adopt ASU 2014-09 as of January 1, 2017, and is in\n the process of determining the method of adoption and evaluating\n the impact on its consolidated financial statements.
\n4. Property\n and Equipment
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | December 31, | \n\n | |||||
| \n | \n | 2014 | \n\n | \n | 2013 | \n\n | ||
| \n | \n | (In\n thousands) | \n\n | |||||
| \n | \n | \n | ||||||
| \n Computer equipment and\n purchased software \n | \n \n | $ | \n3,418 | \n\n | \n | $ | \n3,595 | \n\n |
| \n Machinery and\n equipment \n | \n \n | \n | 688 | \n\n | \n | \n | 704 | \n\n |
| \n Furniture and\n fixtures \n | \n \n | \n | 852 | \n\n | \n | \n | 607 | \n\n |
| \n Leasehold\n improvements \n | \n \n | \n | 1,295 | \n\n | \n | \n | 938 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | \n | 6,253 | \n\n | \n | \n | 5,844 | \n\n |
| \n Less accumulated\n depreciation \n | \n \n | \n | (5,046 | \n) | \n\n | \n | (4,900 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Property and equipment,\n net \n | \n \n | $ | \n1,207 | \n\n | \n | $ | \n944 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Concentration of Credit Risks
\nFinancial instruments that potentially subject the Company to a\n concentration of credit risk principally consist of cash, cash\n equivalents, short term investments, and accounts receivable. The\n Company invests primarily in money market accounts and highly\n liquid debt instruments purchased with an original or remaining\n maturity of greater than 90 days on the date of purchase. Deposits\n held with banks may exceed the amount of insurance provided on such\n deposits. Generally, these deposits may be redeemed upon demand.\n The Company licenses technology primarily to companies in North\n America, Europe, and Asia. To reduce credit risk, management\n performs periodic credit evaluations of its customers’\n financial condition. The Company maintains reserves for estimated\n potential credit losses, but historically has not experienced any\n significant losses related to individual customers or groups of\n customers in any particular industry or geographic area.
\n14. Employee\n Benefit Plan
\nThe Company has a 401(k) tax-deferred savings plan under which\n eligible employees may elect to have a portion of their salary\n deferred and contributed to the 401(k) plan. Contributions may be\n made by the Company at the discretion of the board of directors.\n Beginning in January 2008, the Company matched 25% of the\n employee’s contribution up to $2,000 for the year.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Year ended\n December 31, | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n | \n | (In\n thousands) | \n\n | |||||||||
| \n | \n | \n | \n | |||||||||
| \n Company contribution to 401\n (k) plan \n | \n \n | $ | \n106 | \n\n | \n | $ | \n91 | \n\n | \n | $ | \n77 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Fair Value\n of Financial Instruments
\nFinancial instruments consist primarily of cash equivalents,\n short-term investments, accounts receivable and accounts payable.\n Cash equivalents and short term investments are stated at fair\n value based on quoted market prices, broker or dealer quotations,\n or alternative pricing sources with reasonable levels of price\n transparency. The recorded cost of accounts receivable and accounts\n payable approximate the fair value of the respective assets and\n liabilities.
\n15.\n Contingencies
\nFrom\n time to time, the Company receives claims from third parties\n asserting that the Company’s technologies, or those of its\n licensees, infringe on the other parties’ IP rights.\n Management believes that these claims are without merit.\n Additionally, periodically, the Company is involved in routine\n legal matters and contractual disputes incidental to its normal\n operations. In management’s opinion, the resolution of such\n matters will not have a material adverse effect on the\n Company’s consolidated financial condition, results of\n operations, or liquidity.
\nIn the\n normal course of business, the Company provides indemnifications of\n varying scope to customers against claims of IP infringement made\n by third parties arising from the use of the Company’s IP,\n technology, or products. Historically, costs related to these\n guarantees have not been significant, and the Company is unable to\n estimate the maximum potential impact of these guarantees on its\n future results of operations.
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | December 31, | \n\n | |||||
| \n | \n | 2014 | \n\n | \n | 2013 | \n\n | ||
| \n | \n | (In\n thousands) | \n\n | |||||
| \n Accrued legal \n | \n \n | $ | \n1,065 | \n\n | \n | $ | \n780 | \n\n |
| \n Accrued services \n | \n \n | \n | 518 | \n\n | \n | \n | 226 | \n\n |
| \n Income taxes\n payable \n | \n \n | \n | 69 | \n\n | \n | \n | 41 | \n\n |
| \n Other current\n liabilities \n | \n \n | \n | 573 | \n\n | \n | \n | 606 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total other current\n liabilities \n | \n \n | $ | \n2,225 | \n\n | \n | $ | \n1,653 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | December 31, | \n\n | |||||
| \n | \n | 2014 | \n\n | \n | 2013 | \n\n | ||
| \n | \n | (In\n thousands) | \n\n | |||||
| \n | \n | \n | ||||||
| \n Computer equipment and\n purchased software \n | \n \n | $ | \n3,418 | \n\n | \n | $ | \n3,595 | \n\n |
| \n Machinery and\n equipment \n | \n \n | \n | 688 | \n\n | \n | \n | 704 | \n\n |
| \n Furniture and\n fixtures \n | \n \n | \n | 852 | \n\n | \n | \n | 607 | \n\n |
| \n Leasehold\n improvements \n | \n \n | \n | 1,295 | \n\n | \n | \n | 938 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | \n | 6,253 | \n\n | \n | \n | 5,844 | \n\n |
| \n Less accumulated\n depreciation \n | \n \n | \n | (5,046 | \n) | \n\n | \n | (4,900 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Property and equipment,\n net \n | \n \n | $ | \n1,207 | \n\n | \n | $ | \n944 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
A reconciliation of the beginning and ending amount of gross\n unrecognized tax benefits is as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2014 \n Unrecognized \n Tax Benefits | \n \n | \n | 2013 \n Unrecognized \n Tax Benefits | \n \n | \n | 2012 \n Unrecognized \n Tax Benefits | \n \n | |||
| \n | \n | (In\n thousands) | \n\n | |||||||||
| \n Balance at beginning of\n year \n | \n \n | $ | \n1,634 | \n\n | \n | $ | \n628 | \n\n | \n | $ | \n628 | \n\n |
| \n Gross increases for tax\n positions of prior years \n | \n \n | \n | 0 | \n\n | \n | \n | 896 | \n\n | \n | \n | 0 | \n\n |
| \n Gross decreases for tax\n positions of prior years \n | \n \n | \n | (4 | \n) | \n\n | \n | 0 | \n\n | \n | \n | 0 | \n\n |
| \n Gross increases for tax\n positions of current year \n | \n \n | \n | 114 | \n\n | \n | \n | 110 | \n\n | \n | \n | 0 | \n\n |
| \n Settlements \n | \n \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n |
| \n Lapse of statute of\n limitations \n | \n \n | \n | 0 | \n\n | \n | \n | 0 | \n\n | \n | \n | 0 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Balance at end of\n year \n | \n \n | $ | \n1,744 | \n\n | \n | $ | \n1,634 | \n\n | \n | $ | \n628 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
Information regarding standard stock options outstanding at\n December 31, 2014, 2013, and 2012 is summarized\n below:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Number \n of \n Shares | \n \n | \n | Weighted \n Average \n Exercise \n Price | \n \n | \n | Weighted \n Average \n Remaining \n Contractual \n Life\n (years) | \n \n | \n | Aggregate \n Intrinsic \n Value \n (In millions) | \n \n | ||||
| \n December 31,\n 2012 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Options\n outstanding \n | \n \n | \n | 3,155,631 | \n\n | \n | $ | \n6.65 | \n\n | \n | \n | 5.24 | \n\n | \n | $ | \n3.5 | \n\n |
| \n Options vested and expected\n to vest using estimated forfeiture rates \n | \n \n | \n | 3,019,979 | \n\n | \n | \n | 6.67 | \n\n | \n | \n | 5.17 | \n\n | \n | \n | 3.4 | \n\n |
| \n Options\n exercisable \n | \n \n | \n | 2,329,987 | \n\n | \n | \n | 6.91 | \n\n | \n | \n | 4.69 | \n\n | \n | \n | 2.5 | \n\n |
| \n | \n | \n | \n | \n | ||||||||||||
| \n December 31,\n 2013 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Options\n outstanding \n | \n \n | \n | 3,227,167 | \n\n | \n | $ | \n7.78 | \n\n | \n | \n | 5.46 | \n\n | \n | $ | \n9.9 | \n\n |
| \n Options vested and expected\n to vest using estimated forfeiture rates \n | \n \n | \n | 2,994,044 | \n\n | \n | \n | 7.61 | \n\n | \n | \n | 5.41 | \n\n | \n | \n | 9.6 | \n\n |
| \n Options\n exercisable \n | \n \n | \n | 1,774,546 | \n\n | \n | \n | 6.67 | \n\n | \n | \n | 4.95 | \n\n | \n | \n | 7.5 | \n\n |
| \n | \n | \n | \n | \n | ||||||||||||
| \n December 31,\n 2014 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Options\n outstanding \n | \n \n | \n | 3,486,157 | \n\n | \n | $ | \n8.30 | \n\n | \n | \n | 4.85 | \n\n | \n | $ | \n6.6 | \n\n |
| \n Options vested and expected\n to vest using estimated forfeiture rates \n | \n \n | \n | 3,319,308 | \n\n | \n | \n | 8.21 | \n\n | \n | \n | 4.80 | \n\n | \n | \n | 6.6 | \n\n |
| \n Options\n exercisable \n | \n \n | \n | 2,023,024 | \n\n | \n | \n | 7.18 | \n\n | \n | \n | 4.26 | \n\n | \n | \n | 6.0 | \n\n |
\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Number of \n \n Shares | \n \n | \n | Weighted \n Average \n Exercise \n Price | \n \n | \n | Weighted \n Average \n Remaining \n Contractual \n Life (years) \n | \n \n | \n | Aggregate \n Intrinsic \n Value \n (In millions) | \n \n | ||||
| \n December 31,\n 2014 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Options\n outstanding \n | \n \n | \n | 50,000 | \n\n | \n | $ | \n11.94 | \n\n | \n | \n | 6.15 | \n\n | \n | $ | \n0.0 | \n\n |
| \n Options vested and expected\n to vest using estimated forfeiture rates \n | \n \n | \n | 45,430 | \n\n | \n | \n | 11.94 | \n\n | \n | \n | 6.15 | \n\n | \n | \n | 0.0 | \n\n |
| \n Options\n exercisable \n | \n \n | \n | 0 | \n\n | \n | \n | 0.00 | \n\n | \n | \n | 0.00 | \n\n | \n | \n | 0.0 | \n\n |
\n Stock-based\n Compensation
\nStock-based compensation cost is measured at the grant date\n based on the fair value of the award and is recognized as expense\n on a straight-line basis over the requisite service period, which\n is the vesting period. See Note 9 for further information regarding\n the Company’s stock-based compensation assumptions and\n expenses.
\nRestricted stock award activity for the years ended\n December 31, 2014, 2013, and 2012 was as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Number \n \n of Shares | \n \n | \n | Weighted \n Average \n Grant Date \n Fair\n Value | \n \n | \n | Total \n Fair \n Value\n of \n Awards \n Released \n (In thousands) | \n \n | |||
| \n Outstanding at\n January 1, 2012 \n | \n \n | \n | 18,000 | \n\n | \n | $ | \n6.61 | \n\n | \n | \n | \n | \n |
| \n Awarded \n | \n \n | \n | 57,750 | \n\n | \n | \n | 5.70 | \n\n | \n | \n | \n | \n |
| \n Released \n | \n \n | \n | (31,750 | \n) | \n\n | \n | 6.72 | \n\n | \n | $ | \n171 | \n\n |
| \n Forfeited \n | \n \n | \n | 0 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Outstanding at\n December 31, 2012 \n | \n \n | \n | 44,000 | \n\n | \n | \n | 5.34 | \n\n | \n | \n | \n | \n |
| \n Awarded \n | \n \n | \n | 44,000 | \n\n | \n | \n | 14.09 | \n\n | \n | \n | \n | \n |
| \n Released \n | \n \n | \n | (44,000 | \n) | \n\n | \n | 5.34 | \n\n | \n | \n | 676 | \n\n |
| \n Forfeited \n | \n \n | \n | 0 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Outstanding at\n December 31, 2013 \n | \n \n | \n | 44,000 | \n\n | \n | \n | 14.09 | \n\n | \n | \n | \n | \n |
| \n Awarded \n | \n \n | \n | 35,364 | \n\n | \n | \n | 10.97 | \n\n | \n | \n | \n | \n |
| \n Released \n | \n \n | \n | (44,000 | \n) | \n\n | \n | 14.09 | \n\n | \n | \n | 483 | \n\n |
| \n Forfeited \n | \n \n | \n | 0 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Outstanding at\n December 31, 2014 \n | \n \n | \n | 35,364 | \n\n | \n | \n | 10.97 | \n\n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n |
6. Other\n Current Liabilities
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | December 31, | \n\n | |||||
| \n | \n | 2014 | \n\n | \n | 2013 | \n\n | ||
| \n | \n | (In\n thousands) | \n\n | |||||
| \n Accrued legal \n | \n \n | $ | \n1,065 | \n\n | \n | $ | \n780 | \n\n |
| \n Accrued services \n | \n \n | \n | 518 | \n\n | \n | \n | 226 | \n\n |
| \n Income taxes\n payable \n | \n \n | \n | 69 | \n\n | \n | \n | 41 | \n\n |
| \n Other current\n liabilities \n | \n \n | \n | 573 | \n\n | \n | \n | 606 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total other current\n liabilities \n | \n \n | $ | \n2,225 | \n\n | \n | $ | \n1,653 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
Advertising expense was as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Year ended\n December 31, | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n | \n | (In\n thousands) | \n\n | |||||||||
| \n | \n | \n | \n | |||||||||
| \n Advertising\n expense \n | \n \n | $ | \n344 | \n\n | \n | $ | \n322 | \n\n | \n | $ | \n152 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
Awards granted other than an option or stock appreciation right\n shall reduce the common stock shares available for grant by 1.75\n shares for every share issued.
\n\n
\n| \n | \n | \n | \n | \n |
| \n | \n | December 31, | \n\n | |
| \n | \n | \n 2014 \n | \n \n | |
| \n Common stock shares\n available for grant \n | \n \n | \n | 2,247,565 | \n\n |
| \n Common stock options\n outstanding \n | \n \n | \n | 3,536,157 | \n\n |
| \n Restricted stock awards\n outstanding \n | \n \n | \n | 35,364 | \n\n |
| \n Restricted stock units\n outstanding \n | \n \n | \n | 564,891 | \n\n |
\n Principles\n of Consolidation and Basis of Presentation
\nThe consolidated financial statements include the accounts of\n Immersion Corporation and its wholly-owned subsidiaries, Immersion\n Canada Inc.; Immersion International, LLC; Immersion Medical, Inc.;\n Immersion Japan K.K.; Immersion Ltd.; Immersion Software Ireland\n Ltd.; Haptify, Inc.; and Immersion (Shanghai) Science &\n Technology Company, Ltd. All intercompany accounts, transactions,\n and balances have been eliminated in consolidation. The Company has\n prepared the accompanying consolidated financial statements in\n conformity with accounting principles generally accepted in the\n United States of America (“GAAP”).
\nIncome tax benefit (provisions) from continuing operations\n consisted of the following:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Years Ended December 31, \n | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n | \n | (In\n thousands) | \n\n | |||||||||
| \n Income (loss) from\n continuing operations before benefit (provision) for income\n taxes \n | \n \n | $ | \n6,319 | \n\n | \n | $ | \n3,672 | \n\n | \n | $ | \n(6,558) | \n\n |
| \n Benefit (provision) for\n income taxes \n | \n \n | \n | (2,196 | \n) | \n\n | \n | 36,483 | \n\n | \n | \n | (792 | \n) | \n
| \n Effective tax\n rate \n | \n \n | \n | 34.8 | \n% | \n\n | \n | (993.5 | \n)% | \n\n | \n | (12.1 | \n)% | \n
\n Certain\n Significant Risks and Uncertainties
\nThe Company operates in multiple industries and, accordingly,\n can be affected by a variety of factors. For example, management of\n the Company believes that changes in any of the following areas\n could have a negative effect on the Company in terms of its future\n financial position and results of operations: the mix of revenues;\n the loss of significant customers; fundamental changes in the\n technologies underlying the Company’s and its\n licensees’ products; market acceptance of the Company’s\n and its licensees’ products under development; development of\n sales channels; litigation or other claims in which the Company is\n involved; the ability to successfully assert its patent rights\n against others; the impact of changing economic conditions; the\n hiring, training, and retention of key employees; successful and\n timely completion of product and technology development efforts;\n and new product or technology introductions by\n competitors.
\n\n Information\n regarding RSU’s at December 31, 2014, 2013, and 2012 is\n summarized below:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Number of \n \n Shares | \n \n | \n | Weighted \n Average \n Remaining \n Contractual \n Life (years) \n | \n \n | \n | Aggregate \n Intrinsic \n Value \n \n (In millions) | \n \n | \n | Fair\n Value \n (In millions) | \n \n | ||||
| \n December 31,\n 2012 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n RSUs outstanding \n | \n \n | \n | 708,651 | \n\n | \n | \n | 1.09 | \n\n | \n | $ | \n4.9 | \n\n | \n | $ | \n4.9 | \n\n |
| \n RSUs vested and expected to\n vest using estimated forfeiture rates \n | \n \n | \n | 588,170 | \n\n | \n | \n | 1.05 | \n\n | \n | $ | \n4.0 | \n\n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | ||||||||||||
| \n December 31,\n 2013 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n RSUs outstanding \n | \n \n | \n | 668,056 | \n\n | \n | \n | 0.91 | \n\n | \n | $ | \n6.9 | \n\n | \n | $ | \n6.9 | \n\n |
| \n RSUs vested and expected to\n vest using estimated forfeiture rates \n | \n \n | \n | 583,711 | \n\n | \n | \n | 0.89 | \n\n | \n | $ | \n6.1 | \n\n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | ||||||||||||
| \n December 31,\n 2014 \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n RSUs outstanding \n | \n \n | \n | 564,891 | \n\n | \n | \n | 0.84 | \n\n | \n | $ | \n5.3 | \n\n | \n | $ | \n5.3 | \n\n |
| \n RSUs vested and expected to\n vest using estimated forfeiture rates \n | \n \n | \n | 502,411 | \n\n | \n | \n | 0.80 | \n\n | \n | $ | \n4.8 | \n\n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | December 31, | \n\n | |||||
| \n | \n | 2014 | \n\n | \n | 2013 | \n\n | ||
| \n | \n | (In\n thousands) | \n\n | |||||
| \n Purchased patents and other\n purchased intangible assets \n | \n \n | $ | \n4,605 | \n\n | \n | $ | \n5,731 | \n\n |
| \n Other assets \n | \n \n | \n | 265 | \n\n | \n | \n | 289 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Gross intangibles and other\n assets \n | \n \n | \n | 4,870 | \n\n | \n | \n | 6,020 | \n\n |
| \n Accumulated amortization of\n purchased patents and other purchased intangibles \n | \n \n | \n | (4,579 | \n) | \n\n | \n | (5,639 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Intangibles and other\n assets, net \n | \n \n | $ | \n291 | \n\n | \n | $ | \n381 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
Long-term deferred revenue consisted of the\n following:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | December 31, | \n\n | |||||
| \n | \n | 2014 | \n\n | \n | 2013 | \n\n | ||
| \n | \n | (In\n thousands) | \n\n | |||||
| \n Deferred revenue for Sony\n Computer Entertainment \n | \n \n | $ | \n7,051 | \n\n | \n | $ | \n12,840 | \n\n |
| \n Other deferred\n revenue \n | \n \n | \n | 776 | \n\n | \n | \n | 601 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Long-term deferred\n revenue \n | \n \n | $ | \n7,827 | \n\n | \n | $ | \n13,441 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Description\n of Business
\nImmersion Corporation (the “Company”) was\n incorporated in 1993 in California and reincorporated in Delaware\n in 1999. It is an intellectual property (“IP”) and\n software licensing company focused on the creation, design,\n development, and licensing of patented haptic innovations and\n software that allow people to use their sense of touch more fully\n when operating a wide variety of digital devices.
\n5.\n Intangibles and Other Assets
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | December 31, | \n\n | |||||
| \n | \n | 2014 | \n\n | \n | 2013 | \n\n | ||
| \n | \n | (In\n thousands) | \n\n | |||||
| \n Purchased patents and other\n purchased intangible assets \n | \n \n | $ | \n4,605 | \n\n | \n | $ | \n5,731 | \n\n |
| \n Other assets \n | \n \n | \n | 265 | \n\n | \n | \n | 289 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Gross intangibles and other\n assets \n | \n \n | \n | 4,870 | \n\n | \n | \n | 6,020 | \n\n |
| \n Accumulated amortization of\n purchased patents and other purchased intangibles \n | \n \n | \n | (4,579 | \n) | \n\n | \n | (5,639 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Intangibles and other\n assets, net \n | \n \n | $ | \n291 | \n\n | \n | $ | \n381 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n
\nThe Company amortizes its intangible assets related to\n purchased patents over their estimated useful lives, generally 10\n years from the purchase date. Amortization of intangibles was as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Year ended\n December 31, | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n | \n | (In\n thousands) | \n\n | |||||||||
| \n Amortization of\n Intangibles \n | \n \n | $ | \n67 | \n\n | \n | $ | \n79 | \n\n | \n | $ | \n49 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
The table below includes estimated remaining annual\n amortization expense for purchased patents as of December 31,\n 2014.
\n\n
\n| \n | \n | \n | \n | \n |
| \n | \n | Estimated \n Amortization \n Expense | \n \n | |
| \n | \n | (In thousands) | \n\n | |
| \n 2015 \n | \n \n | $ | \n20 | \n\n |
| \n 2016 \n | \n \n | \n | 6 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n26 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
Customers comprising 10% or greater of the Company’s net\n revenues are summarized as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Years Ended December 31, | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n | \n | \n | \n | |||||||||
| \n Samsung\n Electronics \n | \n \n | \n | 38 | \n% | \n\n | \n | 47 | \n% | \n\n | \n | 24 | \n% | \n
| \n Customer B \n | \n \n | \n | 17 | \n% | \n\n | \n | \n | * | \n\n | \n | \n | * | \n
| \n Customer C \n | \n \n | \n | 12 | \n% | \n\n | \n | \n | * | \n\n | \n | \n | * | \n
| \n Customer D \n | \n \n | \n | \n | * | \n\n | \n | \n | * | \n\n | \n | \n | * | \n
| \n Customer E \n | \n \n | \n | \n | * | \n\n | \n | \n | * | \n\n | \n | \n | * | \n
| \n Customer F \n | \n \n | \n | \n | * | \n\n | \n | \n | * | \n\n | \n | \n | * | \n
| \n Customer G \n | \n \n | \n | \n | * | \n\n | \n | \n | * | \n\n | \n | \n | * | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | \n | 67 | \n% | \n\n | \n | 47 | \n% | \n\n | \n | 24 | \n% | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n
\n* Revenue derived from customer represented less than 10% for\n the period.
\nThe following is a summary of revenues by geographic areas.\n Revenues are broken out geographically by the ship-to location of\n the customer. Geographic revenue as a percentage of total revenues\n by region was as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Years Ended December 31, | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n | \n | \n | \n | |||||||||
| \n North America \n | \n \n | \n | 29 | \n% | \n\n | \n | 28 | \n% | \n\n | \n | 41 | \n% | \n
| \n Europe \n | \n \n | \n | 3 | \n% | \n\n | \n | 4 | \n% | \n\n | \n | 13 | \n% | \n
| \n Asia \n | \n \n | \n | 68 | \n% | \n\n | \n | 68 | \n% | \n\n | \n | 46 | \n% | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | \n | 100 | \n% | \n\n | \n | 100 | \n% | \n\n | \n | 100 | \n% | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
Geographic revenue as a percentage of total revenues by country\n was as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Years Ended December 31, | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n | \n | \n | \n | |||||||||
| \n United States of\n America \n | \n \n | \n | 27 | \n% | \n\n | \n | 26 | \n% | \n\n | \n | 38 | \n% | \n
| \n Korea \n | \n \n | \n | 51 | \n% | \n\n | \n | 58 | \n% | \n\n | \n | 36 | \n% | \n
| \n Japan \n | \n \n | \n | 10 | \n% | \n\n | \n | 7 | \n% | \n\n | \n | \n | * | \n
| \n Countries of which none are\n more than 10% in a year \n | \n \n | \n | 12 | \n% | \n\n | \n | 9 | \n% | \n\n | \n | 26 | \n% | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | \n | 100 | \n% | \n\n | \n | 100 | \n% | \n\n | \n | 100 | \n% | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n
\n* Represents less than 10% of the Company’s revenue and\n is included below.
\nCustomers comprising 10% or greater of the Company’s\n outstanding accounts and other receivable are summarized as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | December 31, | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n | \n | \n | \n | |||||||||
| \n Samsung\n Electronics \n | \n \n | \n | \n | * | \n\n | \n | \n | * | \n\n | \n | \n | * | \n
| \n Customer B \n | \n \n | \n | \n | * | \n\n | \n | \n | * | \n\n | \n | \n | * | \n
| \n Customer C \n | \n \n | \n | 66 | \n% | \n\n | \n | \n | * | \n\n | \n | 33 | \n% | \n
| \n Customer D \n | \n \n | \n | \n | * | \n\n | \n | \n | * | \n\n | \n | 38 | \n% | \n
| \n Customer E \n | \n \n | \n | \n | * | \n\n | \n | 11 | \n% | \n\n | \n | \n | * | \n
| \n Customer F \n | \n \n | \n | \n | * | \n\n | \n | \n | * | \n\n | \n | 10 | \n% | \n
| \n Customer G \n | \n \n | \n | 16 | \n% | \n\n | \n | 28 | \n% | \n\n | \n | \n | * | \n
\n
\n* Represents less than 10% of the Company’s outstanding\n accounts and other receivables.
\nThe following is a summary of revenues by market areas. Revenue\n as a percentage of total revenues by market was as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Years Ended December 31, | \n\n | |||||||||
| \n | \n | \n 2014 \n | \n \n | \n | \n 2013 \n | \n \n | \n | \n 2012 \n | \n \n | |||
| \n | \n | \n | \n | |||||||||
| \n Mobile, Wearables, and\n Consumer \n | \n \n | \n | 60 | \n% | \n\n | \n | 66 | \n% | \n\n | \n | 46 | \n% | \n
| \n Gaming Devices \n | \n \n | \n | 27 | \n% | \n\n | \n | 21 | \n% | \n\n | \n | 28 | \n% | \n
| \n Automotive \n | \n \n | \n | 5 | \n% | \n\n | \n | 5 | \n% | \n\n | \n | 6 | \n% | \n
| \n Medical \n | \n \n | \n | 8 | \n% | \n\n | \n | 8 | \n% | \n\n | \n | 16 | \n% | \n
| \n Other \n | \n \n | \n | 0 | \n% | \n\n | \n | 0 | \n% | \n\n | \n | 4 | \n% | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | \n | 100 | \n% | \n\n | \n | 100 | \n% | \n\n | \n | 100 | \n% | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |