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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 3, 2001
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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IMMERSION CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-3180138
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
801 FOX LANE, SAN JOSE, CALIFORNIA 95131 (408) 467-1900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROBERT O'MALLEY
801 FOX LANE, SAN JOSE, CALIFORNIA 95131 (408) 467-1900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPY TO:
STEPHEN E. NEWTON, ESQ.
HELLER EHRMAN WHITE & MCAULIFFE LLP
601 SOUTH FIGUEROA STREET, 40TH FLOOR
LOS ANGELES, CALIFORNIA 90017
TELEPHONE: (213) 689-0200
FACSIMILE: (213) 614-1868
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time as soon as practicable after this Registration Statement
become effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration number of the earlier
effective registration statement for the same offering: [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE
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Common Stock, $0.001 par
value.................. 259,130 shares $7.25 $1,878,693 $470
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(1) In accordance with Rule 416 under the Securities Act of 1933, common stock
offered hereby shall also be deemed to cover additional securities to be
offered or issued to prevent dilution resulting from stock splits, stock
dividends or similar transactions.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended,
based on the average of the high and low prices of the common stock on the
Nasdaq National Market on January 2, 2001, as reported in The Wall Street
Journal.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY 3, 2001
PROSPECTUS
259,130 Shares
IMMERSION CORPORATION
Common Stock
This prospectus may be used only in connection with the resale, from time
to time, of up to 259,130 shares of our common stock, $0.001 par value, by the
selling stockholders. SUCH SHARES OF OUR COMMON STOCK MAY ONLY BE SOLD UNDER
THIS PROSPECTUS DURING THE LIMITED TIMES PERMITTED BY THE REGISTRATION RIGHTS
AGREEMENT, DATED AUGUST 31, 2000, AMONG US AND THE SELLING STOCKHOLDERS.
INFORMATION ON THE SELLING STOCKHOLDERS, AND THE TIMES AND MANNER IN WHICH THEY
MAY OFFER AND SELL SHARES OF OUR COMMON STOCK UNDER THIS PROSPECTUS, IS PROVIDED
UNDER "SELLING STOCKHOLDERS" AND "PLAN OF DISTRIBUTION" IN THIS PROSPECTUS. We
will not receive the proceeds from the sale of these shares by the selling
stockholders under this prospectus.
Our address is 801 Fox Lane, San Jose, California 95131, and our telephone
number is (408) 467-1900.
Our common stock trades on the Nasdaq National Market under the symbol
"IMMR". On January 2, 2001, the closing price for our common stock, as reported
on the Nasdaq National Market, was $7.25 per share.
BEGINNING ON PAGE 1, WE HAVE LISTED A NUMBER OF "RISK FACTORS" WHICH YOU
SHOULD CONSIDER. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY BEFORE YOU MAKE
YOUR INVESTMENT DECISION.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. The selling stockholders are offering to sell, and
seeking offers to buy, shares of Immersion's common stock only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or of any sale of the shares.
In this prospectus, "Immersion," "we," "us" and "our" refer to Immersion
Corporation.
The date of this prospectus is , 2001
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OUR COMPANY
We develop hardware and software technologies that enable users to interact
with computers using their sense of touch. Our patented technologies, which we
call TouchSense(TM), enable a wide range of devices to deliver tactile
sensations that correspond to on-screen events. We focus on four application
areas -- consumer computer peripherals, automotive interfaces, surgical
simulation products and specialized computer peripherals for professional and
industrial applications.
In high volume market areas such as consumer computer peripherals and
automotive interfaces, we primarily license our touch-enabling technologies to
third party manufacturers. We currently license our technology to market leaders
in these areas, including companies such as Logitech, Microsoft, and BMW. In
lower volume market areas, such as surgical simulation and three-dimensional
computer imaging, including three-dimensional image capture and interaction, we
focus primarily on product sales. In all market areas, we engage in development
projects for third parties. Our objective is to proliferate our TouchSense
technologies across markets, platforms and applications.
We completed our merger with Virtual Technologies, Inc. in August 2000.
Virtual Technologies develops and markets touch-enabled gloves and real-time,
three-dimensional software products that are used in high-end simulation,
mechanical computer-aided design and research. The merger was accounted for as a
purchase transaction. The selling stockholders listed under "Selling
Stockholders" in this prospectus were former shareholders of Virtual
Technologies.
We completed our merger with HT Medical Systems, Inc. in September 2000. HT
Medical is a developer and manufacturer of state-of-the-art products that
simulate hands-on medical procedures to create realistic training environments
for doctors and other healthcare personnel. The merger was accounted for as a
pooling of interests. Accordingly, our consolidated financial statements have
been restated for all periods presented as if we and HT Medical had always been
combined.
RISK FACTORS
You should carefully consider the following risks and uncertainties before
you invest in our common stock. Investing in our common stock involves risk. If
any of the following risks or uncertainties actually occurs, our business,
financial condition or results of operations could be materially adversely
affected. The following risks and uncertainties are not the only ones facing us.
Additional risks and uncertainties of which we are unaware or which we currently
believe are immaterial could also materially adversely affect our business,
financial condition or results of operations. In any case, the trading price of
our common stock could decline, and you could lose all or part of your
investment. See also, "Forward-Looking Statements."
THE MARKET FOR OUR TOUCH-ENABLING TECHNOLOGIES IS AT AN EARLY STAGE AND IF
MARKET DEMAND DOES NOT DEVELOP, WE MAY NOT ACHIEVE OR SUSTAIN REVENUE GROWTH.
The market for touch-enabling technology is at an early stage and if we and
our licensees are unable to develop consumer demand for touch-enabled products,
we may not achieve or sustain revenue growth. To date, consumer demand for our
technologies has been largely limited to the computer gaming peripherals market.
We are currently working to increase the demand for our touch-enabling
technologies in the general purpose personal computer, surgical simulation and
automotive interface markets.
In the general purpose computer market, we have licensed our touch-enabling
technology to Logitech and Primax for use in computer mice. The first computer
mouse incorporating our touch-enabling technologies was launched by Logitech,
one of our licensees, during the fourth quarter of 1999. In September 2000,
Logitech launched two new lower-cost mouse products, the iFeel(TM) Mouse and the
iFeel(TM) MouseMan(R), that incorporate our touch-enabling technologies. While
the first touch-enabled mouse was marketed for gaming and web applications, the
new iFeel mouse products are being marketed for use with general purpose
computer applications. Despite the introduction of these new mouse products,
touch-enabled mice may not achieve commercial acceptance or generate significant
royalty revenue for us.
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In addition, software developers may elect not to create additional games or
other applications that support our touch-enabling technology.
We are also working to increase demand for our technologies in the
automotive interface market. In this market, we have licensed our touch-enabling
technologies to BMW for use in automotive controls and have entered into a
strategic partnership with ALPS. In the medical simulation market, we sell
surgical simulation products.
Even if our technologies are ultimately widely adopted, widespread adoption
may take a long time to occur. The timing and amount of royalties and product
sales that we receive will depend on whether the products marketed achieve
widespread adoption and, if so, how rapidly that adoption occurs. We expect that
we will need to pursue extensive and expensive marketing and sales efforts to
educate prospective licensees and consumers about the uses and benefits of our
technologies and to persuade software developers to create software that
utilizes our technologies.
WE HAD AN ACCUMULATED DEFICIT OF $32.3 MILLION AS OF SEPTEMBER 30, 2000, WILL
EXPERIENCE LOSSES IN THE FUTURE AND MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY.
Since 1997, we have incurred losses in every fiscal quarter, and we expect
losses through at least 2001. We will need to generate significant revenue to
achieve and maintain profitability. We may not achieve, sustain or increase
profitability in the future. We anticipate that our expenses will increase
substantially in the foreseeable future as we:
- attempt to expand the market for touch-enabled products;
- increase our sales efforts;
- incur additional expenses related to the operation of businesses we have
acquired or will acquire;
- continue to develop our technologies;
- pursue strategic relationships; and
- protect and enforce our intellectual property.
If our revenues grow more slowly than we anticipate or if our operating
expenses exceed our expectations, we may not achieve or maintain profitability.
OUR HISTORICAL FINANCIAL INFORMATION DOES NOT REFLECT OUR BUSINESS STRATEGY TO
ACHIEVE REVENUE GROWTH THROUGH ROYALTY PAYMENTS FROM OUR LICENSEES ON SALES OF
THEIR TOUCH-ENABLED PRODUCTS, A STRATEGY FROM WHICH HISTORICALLY WE HAVE DERIVED
LESS THAN ONE-QUARTER OF OUR REVENUES.
We cannot predict our future revenues based on our historical financial
information. Historically, we derived the majority of our revenues from product
sales, including sales of devices used to create three-dimensional computer
images of small objects, medical simulation products and a specialized non-touch
enabled computer mouse used for mapmaking. A substantial portion of our
historical product sales were of products that did not use our touch-enabling
technology but used related advanced computer peripheral technologies.
Historically, we have also derived revenues from contracts with our licensees to
assist in the development of our licensees' touch-enabled products and from
development contracts with government agencies for touch-enabling technology.
We are concentrating our current marketing, research and development
activities on licensing our touch-enabling technology to a greater degree than
in the past. Accordingly, our historical results should not be relied upon as an
indicator of our future performance. For example, we derived only 4% of our
total revenues for 1998 from royalty revenue. By contrast, we derived 20% of our
total revenues from royalty revenue in 1999, 21% for the nine months ended
September 30, 2000 and 8% for the three months ended September 30, 2000. While
we anticipate that royalty revenue from licensing our technologies will
constitute an increasing portion of our revenues, our recently acquired
subsidiaries, HT Medical and Virtual Technologies, are expected to contribute to
an increase in product sales and contract revenues.
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Royalty revenue as a percentage of total revenue may vary significantly on a
period-to-period basis due to factors such as the timing of new product
introductions and the seasonality of product sales by our licensees.
THE INTEGRATION OF HT MEDICAL AND VIRTUAL TECHNOLOGIES MAY BE DIFFICULT TO
ACHIEVE, WHICH MAY ADVERSELY AFFECT OPERATIONS.
We recently completed the acquisition of HT Medical, a corporation with
approximately 60 employees based in Gaithersburg, Maryland and Virtual
Technologies, a corporation with approximately 15 employees based in Palo Alto,
California. Immersion, HT Medical and Virtual Technologies have operated
independently in the past. The combination of these three businesses may be
difficult. If we fail to integrate the businesses successfully the operating
results of the combined company could be adversely affected and the combined
company may not achieve the benefits or operating efficiencies that we hope to
obtain from the acquisitions. Uncertainties as to whether HT Medical and Virtual
Technologies employees will remain with HT Medical, Virtual Technologies,
Immersion and/or the combined company during the integration process may affect
the business operations of each company. It may not be possible to continue to
retain enough key employees of HT Medical and Virtual Technologies to operate
our businesses effectively. Moreover, we do not know whether the products,
systems and personnel of the three companies will be fully compatible.
WE HAVE IN THE PAST, AND MAY IN THE FUTURE, ENGAGE IN ACQUISITIONS THAT DILUTE
STOCKHOLDER'S INTERESTS, DIVERT MANAGEMENT ATTENTION OR CAUSE INTEGRATION
PROBLEMS.
As part of our business strategy, we have in the past acquired, and may in
the future acquire, businesses or intellectual property that we feel could
complement our business, enhance our technical capabilities or increase our
intellectual property portfolio. We recently completed the acquisitions of HT
Medical and Virtual Technologies. If we consummate acquisitions through an
exchange of our securities, our stockholders could suffer significant dilution.
Acquisitions could also create risks for us, including:
- unanticipated costs associated with the acquisitions;
- use of substantial portions of our available cash to consummate the
acquisitions;
- diversion of management's attention from other business concerns;
- difficulties in assimilation of acquired personnel or operations; and
- potential intellectual property infringement claims related to newly
acquired product lines.
Any acquisitions, even if successfully completed, might not generate
significant additional revenue or provide any benefit to our business.
OUR BUSINESS STRATEGY FOR ACHIEVING REVENUE GROWTH RELIES SIGNIFICANTLY ON
ROYALTY PAYMENTS FROM SALES BY OUR LICENSEES OF THEIR TOUCH-ENABLED MOUSE
PRODUCTS.
If our licensees' touch-enabled mouse products do not achieve commercial
acceptance or if production or other difficulties that sometimes occur when a
new product is introduced interfere with sales of our licensees' mouse products,
our ability to achieve revenue growth could be significantly impaired. The first
computer mouse incorporating our technology was launched by Logitech, a licensee
of our technology, during the fourth quarter of 1999. To date, sales of
Logitech's first touch-enabled mouse product, the Wingman Force Feedback Mouse,
have not reached desired levels. We believe that the facts that the first
product was being marketed, in part, as a gaming product, that it was introduced
late in the 1999 Christmas buying season, that it was relatively expensive, and
that many popular software titles targeted at mice do not yet support force
feedback, have contributed to slow sales of this product.
In September 2000, Logitech launched two new lower-cost, touch-enabled
mouse products, the iFeel Mouse and the iFeel MouseMan, each of which is
targeted for use with general purpose computer applications, such as business
productivity and web applications. In addition to their lower cost, these new
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mouse products are designed to provide basic tactile feedback to users without
additional external software support, and therefore mitigate the need for
external software development in order to create demand for TouchSense-enabled
hardware products. Logitech has shifted its manufacturing, sales and marketing
efforts from the Wingman Force Feedback Mouse to these new lower-cost,
touch-enabled mouse products. In addition, we have also licensed our lower-cost,
touch-enabling mouse technology to Primax, a manufacturer of computer mice.
However, there can be no assurance that these new mouse products will be widely
accepted in the marketplace, and if they are not widely accepted, we may be
unable to grow our revenues.
WE DO NOT CONTROL OR INFLUENCE OUR LICENSEES' MANUFACTURING, PROMOTION,
DISTRIBUTION OR PRICING OF THEIR PRODUCTS INCORPORATING OUR TOUCH-ENABLING
TECHNOLOGIES, UPON WHICH WE ARE DEPENDENT TO GENERATE ROYALTY REVENUE.
A key part of our primary business strategy is to license our intellectual
property to companies that manufacture and sell products incorporating our
touch-enabling technologies. The sale of those products generates royalty
revenue for us. For the year ended December 31, 1999, 20% of our total revenue
was royalty revenue, for the nine-month period ended September 30, 2000, 21% of
our total revenue was royalty revenue, and for the three-month period ended
September 30, 2000, 8% of our total revenues was royalty revenue. However, we do
not control or influence the manufacture, promotion, distribution or pricing of
products that are manufactured and sold by our licensees and that incorporate
our touch-enabling technologies. As a result, products incorporating our
technologies may not be brought to market, achieve commercial acceptance or
generate meaningful royalty revenue for us. For us to generate royalty revenue,
those licensees that pay us per-unit royalties must manufacture and distribute
products incorporating our touch-enabling technologies in a timely fashion and
generate consumer demand through marketing and other promotional activities.
Products incorporating our touch-enabling technologies are generally more
difficult to design and manufacture than products that do not incorporate our
touch-enabling technologies, and these difficulties may cause product
introduction delays. If our licensees fail to stimulate and capitalize upon
market demand for products that generate royalties for us, our revenues will not
grow. Peak demand for products that incorporate our technologies, especially in
the computer gaming peripherals market, typically occurs in the third and fourth
calendar quarters as a result of increased demand during the year-end holiday
season. If our licensees do not ship licensed products in a timely fashion or
fail to achieve strong sales in the second half of the calendar year, we would
not receive related royalty revenue.
OUR REVENUES FROM TOUCH-ENABLED MOUSE PRODUCTS MAY BE ADVERSELY AFFECTED BY THE
CURRENT WORLDWIDE SLOWDOWN IN THE GROWTH OF PERSONAL COMPUTER HARDWARE AND
SOFTWARE SALES.
Several large personal computer hardware and software manufacturers have
recently announced slower than anticipated growth in personal computer hardware
and software sales. If this trend continues, it may adversely affect sales of
our royalty-bearing, touch-enabled mouse products. The impact of this trend on
our sales may be more pronounced if a significant contributing cause to the
trend is a reduction in the amount that individuals and companies have budgeted
for personal computer-related devices such as touch-enabled mice, rather than
saturation of the market for personal computers generally.
WE HAVE LIMITED EXPERIENCE MARKETING AND SELLING THE PRODUCTS OF OUR RECENTLY
ACQUIRED SUBSIDIARIES, AND IF WE ARE UNSUCCESSFUL IN MARKETING AND SELLING THESE
PRODUCTS WE MAY NOT ACHIEVE OR SUSTAIN PRODUCT REVENUE GROWTH.
Immersion has limited experience marketing and selling medical simulation
products either directly or through distributors. The success of our efforts to
sell HT Medical's medical simulation products will depend upon our ability to
establish a qualified sales force and establish relationships with distributors.
HT Medical's current sales and marketing staff is very limited, and we must
attract and retain qualified personnel to direct the sales and marketing of HT
Medical's medical procedural simulation products. We may not be successful in
attracting and retaining the personnel necessary to sell and market HT Medical's
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products successfully. There is no assurance that our direct selling efforts
will be effective, distributors will market HT Medical's products successfully
or, if our relationships with distributors terminate, we will be able to
establish relationships with other distributors on satisfactory terms, if at
all. Any disruption in the distribution, sales or marketing network for HT
Medical's products could have a material adverse effect on our product revenues.
Immersion has limited experience marketing and selling high-end simulation
products. The success of our efforts to sell Virtual Technologies' whole-hand,
touch-enabled gloves, such as Virtual Technologies' CyberGlove(R), and
real-time, three-dimensional interactive software products will depend upon our
ability to manage a qualified sales force effectively and establish
relationships with distributors. Virtual Technologies' current sales and
marketing staff is limited and we must attract and retain qualified personnel to
direct the sales and marketing of its products. We may not be successful in
attracting and retaining the personnel necessary to sell and market Virtual
Technologies' products successfully. There is no assurance that our direct
selling efforts will be effective, distributors will market Virtual
Technologies' products successfully or, if relationships with distributors
terminate, we will be able to establish relationships with other distributors on
satisfactory terms, if at all. Any disruption in the distribution, sales or
marketing network for Virtual Technologies' products could have a material
adverse effect on our product revenues.
BECAUSE LOGITECH IS OUR ONLY LICENSEE CURRENTLY SELLING TOUCH-ENABLED MICE, OUR
ROYALTY REVENUE FROM TOUCH-ENABLED MICE WILL BE SIGNIFICANTLY REDUCED IF
LOGITECH DOES NOT EFFECTIVELY MANUFACTURE AND MARKET TOUCH-ENABLED MICE
PRODUCTS.
Although we have licensed our touch-enabling mouse technology to an
additional licensee, Primax, Logitech is currently the only licensee selling
touch-enabled mice. If Logitech does not effectively manufacture, market and
distribute its touch-enabled mouse product, our royalty revenue from
touch-enabled mice would be significantly reduced. In addition, a lack of market
acceptance of the Logitech touch-enabled mouse might dissuade other potential
licensees from licensing our technologies for touch-enabled mice and other
products.
IF WE FAIL TO PROTECT AND ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS, OUR ABILITY
TO LICENSE OUR TECHNOLOGIES AND TO GENERATE REVENUES WOULD BE IMPAIRED.
Our business depends on generating revenues by licensing our intellectual
property rights and by selling products that incorporate our technologies. If we
are not able to protect and enforce those rights, our ability to obtain future
licenses and royalty revenue could be impaired. In addition, if a court were to
limit the scope of, declare unenforceable or invalidate any of our patents,
current licensees may refuse to make royalty payments or may themselves choose
to challenge one or more of our patents. Also it is possible that:
- our pending patent applications may not result in the issuance of
patents;
- our patents may not be broad enough to protect our proprietary rights;
and
- effective patent protection may not be available in every country in
which our licensees do business.
We also rely on licenses, confidentiality agreements and copyright,
trademark and trade secret laws to establish and protect our proprietary rights.
It is possible that:
- laws and contractual restrictions may not be sufficient to prevent
misappropriation of our technologies or deter others from developing
similar technologies; and
- policing unauthorized use of our products and trademarks would be
difficult, expensive and time-consuming, particularly overseas.
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IF WE ARE UNABLE TO ENTER INTO NEW LICENSING ARRANGEMENTS WITH OUR EXISTING
LICENSEES AND WITH ADDITIONAL THIRD-PARTY MANUFACTURERS FOR OUR TOUCH-ENABLING
TECHNOLOGY, OUR ROYALTY REVENUE MAY NOT GROW.
Our revenue growth is significantly dependent on our ability to enter into
new licensing arrangements. Our failure to enter into new licensing arrangements
will cause our operating results to suffer. We face numerous risks in obtaining
new licenses on terms consistent with our business objectives and in
maintaining, expanding and supporting our relationships with our current
licensees. These risks include:
- the lengthy and expensive process of building a relationship with
potential licensees;
- the fact that we may compete with the internal design teams of existing
and potential licensees;
- difficulties in persuading consumer product manufacturers to work with
us, to rely on us for critical technology and to disclose to us
proprietary product development and other strategies; and
- difficulties in persuading existing and potential licensees to bear the
development costs necessary to incorporate our technologies into their
products.
OUR QUARTERLY REVENUES AND OPERATING RESULTS ARE VOLATILE, AND IF OUR FUTURE
RESULTS ARE BELOW THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS OR INVESTORS, THE
PRICE OF OUR COMMON STOCK IS LIKELY TO DECLINE.
Our revenues and operating results are likely to vary significantly from
quarter to quarter due to a number of factors, many of which are outside of our
control and any of which could cause the price of our common stock to decline.
These factors include:
- the establishment or loss of licensing relationships;
- the timing of payments under fixed and/or up-front license agreements;
- the timing of our expenses, including costs related to acquisitions of
technologies or businesses;
- the timing of introductions of new products and product enhancements by
us, our licensees and their competitors;
- our ability to develop and improve our technologies;
- our ability to attract, integrate and retain qualified personnel; and
- seasonality in the demand for our licensees' products.
Accordingly, we believe that period-to-period comparisons of our operating
results should not be relied upon as an indicator of our future performance. In
addition, because a high percentage of our operating expenses is fixed, a
shortfall of revenues can cause significant variations in operating results from
period to period.
THE HIGHER COST OF PRODUCTS INCORPORATING OUR TOUCH-ENABLING TECHNOLOGIES MAY
INHIBIT OR PREVENT THE WIDESPREAD ADOPTION AND SALE OF PRODUCTS INCORPORATING
OUR TECHNOLOGIES.
Personal computer gaming peripherals, computer mice and automotive controls
incorporating our touch-enabling technologies are more expensive than similar
competitive products that are not touch-enabled. Although major manufacturers,
such as Logitech, Microsoft and BMW, have licensed our technology, the greater
expense of products containing our touch-enabling technologies as compared to
non-touch-enabled products may be a significant barrier to the widespread
adoption and sale of touch-enabled products.
IF OUR TECHNOLOGIES ARE UNABLE TO GAIN MARKET ACCEPTANCE OTHER THAN IN
TOUCH-ENABLED JOYSTICKS AND STEERING WHEELS, OUR ROYALTY REVENUE GROWTH WILL BE
LIMITED.
Substantially all of our royalty revenue has been derived from the
licensing of our portfolio of touch-enabling technology for personal computer
gaming peripherals such as joysticks and steering wheels. The market for
joysticks and steering wheels for use with personal computers is a substantially
smaller
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market than either the mouse market or the dedicated gaming console market and
is characterized by declining average selling prices. If we are unable to gain
market acceptance beyond the personal computer gaming peripherals market, we may
not achieve royalty revenue growth.
COMPETITION IN COMPUTER PERIPHERAL PRODUCTS IN BOTH THE GENERAL PURPOSE
COMPUTING AND COMPUTER GAMING MARKETS COULD LEAD TO REDUCTIONS IN THE SELLING
PRICE OF PERIPHERAL PRODUCTS OF OUR LICENSEES, WHICH WOULD REDUCE OUR ROYALTY
REVENUE.
The general purpose computing and computer gaming markets in which our
licensees sell peripheral products are highly competitive and are characterized
by rapid technological change, short product life cycles, cyclical market
patterns, a trend of declining average selling prices and increasing foreign and
domestic competition. We believe that competition among computer peripheral
manufacturers will continue to be intense, and that competitive pressures will
drive the price of our licensees' products downward. Any reduction in our
royalties per unit that is not offset by corresponding increases in unit sales
will cause our revenues to decline.
COMPETITION IN THE TOUCH-ENABLED GLOVE MARKET AND THE REAL-TIME,
THREE-DIMENSIONAL SOFTWARE PRODUCT MARKET COULD LEAD TO REDUCTIONS IN THE
SELLING PRICES OF OUR PRODUCTS, WHICH MAY REDUCE OUR PRODUCT REVENUE.
Like the computer peripheral product market, the touch-enabled glove and
real-time, three-dimensional interactive software products markets are highly
competitive and subject to rapid technological change, a trend of declining
average selling prices and increasing competition. We expect that competition in
this market will continue to be intense and that this competition may drive the
price of our products downward. Declining prices of our products which are not
offset by increased volume may cause our product revenues to decline.
THE MARKET FOR OUR LIGHTSCRIBE 3D(TM) PRODUCT, AN OPTICALLY-BASED,
THREE-DIMENSIONAL DIGITIZER, IS AT AN EARLY STAGE, AND OUR PRODUCT REVENUES MAY
NOT GROW IF MARKET DEMAND DOES NOT DEVELOP.
We recently introduced our LightScribe 3D product, which uses a video
camera, hand-held laser stylus, and specialized image processing software to
allow users to create three-dimensional images of objects. The LightScribe 3D is
being marketed for the creation of high-quality, fully-textured, three-
dimensional models that can be displayed and manipulated on web pages. The
market for digitizers to facilitate the creation of such three-dimensional web
content is at an early stage and if demand does not develop we may not be able
to grow our product revenues.
BECAUSE WE HAVE A FIXED PAYMENT LICENSE WITH MICROSOFT, OUR ROYALTY REVENUE FROM
LICENSING JOYSTICKS AND STEERING WHEELS IN THE GAMING MARKET MIGHT DECLINE IF
MICROSOFT INCREASES MICROSOFT'S VOLUME OF SALES OF TOUCH-ENABLED JOYSTICKS AND
STEERING WHEELS AT THE EXPENSE OF OUR OTHER LICENSEES.
Under the terms of our present agreement with Microsoft, Microsoft receives
a perpetual, worldwide, irrevocable, non-exclusive license under our patents for
Microsoft's SideWinder Force Feedback Pro Joystick and its SideWinder Force
Feedback Wheel, and for a future replacement version of these specific
SideWinder products having essentially similar functional features. Instead of
an ongoing royalty on Microsoft's sales of licensed products, the agreement
provides for a payment of $2.35 million, which we recognized in equal monthly
increments over a one-year period that ended in mid-July 2000. We will not
receive any further revenues or royalties from Microsoft under our current
agreement with Microsoft. We derived 10% of our total revenues and 48% of our
royalty revenue for the twelve months ended December 31, 1999 from Microsoft. In
addition, we derived 13% of our total revenues and 60% of our royalty revenues
for the nine months ended September 30, 2000 from Microsoft and 3% of our total
revenues and 37% of our royalty revenues for the three months ended September
30, 2000 from Microsoft. At the present time, we do not have a license agreement
with Microsoft for products other than the SideWinder joystick and steering
wheel. Microsoft has a significant share of the market for touch-enabled
joysticks and steering wheels for personal computers. Microsoft has
significantly greater financial, sales and
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marketing resources, as well as greater name recognition and a larger customer
base, than our other licensees. In the event that Microsoft increases its share
of this market, our royalty revenue from other licensees in this market segment
might decline.
BECAUSE WE NO LONGER RECEIVE ROYALTY REVENUE UNDER OUR CURRENT AGREEMENT WITH
MICROSOFT, OUR ROYALTY REVENUES IN FUTURE PERIODS MAY DECLINE.
As described above, revenue recognized under our current agreement with
Microsoft ended in mid-July 2000. Because the agreement with Microsoft accounted
for a substantial portion of our royalty revenues, our royalty revenues in
future periods will decline if we do not either enter into agreements with
additional licensees of our touch-enabling technologies or receive larger
royalty payments from our existing licensees.
LOGITECH ACCOUNTS FOR A LARGE PORTION OF OUR ROYALTY REVENUE AND THE FAILURE OF
LOGITECH TO ACHIEVE SALES VOLUMES FOR ITS GAMING AND CURSOR CONTROL PERIPHERAL
PRODUCTS THAT INCORPORATE OUR TOUCH-ENABLING TECHNOLOGIES MAY REDUCE OUR ROYALTY
REVENUE.
We derived 9% of our total revenues and 33% of our royalty revenue for the
twelve months ended December 31, 1999 from Logitech. For the nine-month period
ended September 30, 2000, we derived 5% of our total revenues and 19% of our
royalty revenue from Logitech and for the three-month period ended September 30,
2000, we derived 2% of our total revenues and 29% of our royalty revenue from
Logitech. We expect that a significant portion of our total revenues will
continue to be derived from Logitech. If Logitech fails to achieve anticipated
sales volumes for its computer peripheral products that incorporate our
technologies, our royalty revenue would be reduced.
BECAUSE PERSONAL COMPUTER PERIPHERAL PRODUCTS THAT INCORPORATE OUR
TOUCH-ENABLING TECHNOLOGIES CURRENTLY MUST WORK WITH MICROSOFT'S OPERATING
SYSTEM SOFTWARE, OUR COSTS COULD INCREASE AND OUR REVENUES COULD DECLINE IF
MICROSOFT MODIFIES ITS OPERATING SYSTEM SOFTWARE.
Our hardware and software technology for personal computer peripheral
products that incorporate our touch-enabling technologies is currently
compatible with Microsoft's Windows 98, Windows 2000 and Windows Me operating
systems software, including DirectX, Microsoft's entertainment applications
programming interface. If Microsoft modifies its operating system, including
DirectX, we may need to modify our technologies and this could cause delays in
the release of products by our licensees. If Microsoft modifies its software
products in ways that limit the use of our other licensees' products, our costs
could be increased and our revenues could decline.
LITIGATION REGARDING INTELLECTUAL PROPERTY RIGHTS COULD BE EXPENSIVE,
DISRUPTIVE, AND TIME CONSUMING, AND COULD ADVERSELY AFFECT OUR BUSINESS.
Intellectual property litigation, whether brought by us or by others, could
result in the expenditure of significant financial resources and the diversion
of management's time and efforts. From time to time, we initiate claims against
third parties that we believe infringe our intellectual property rights. To
date, most of these claims have not led to any litigation. However, on June 18,
2000, we filed an action for patent infringement in the United States District
Court for the Northern District of California against InterAct Accessories,
Inc., one of our existing licensees, based on certain unlicensed gamepad and
steering wheel products currently being marketed by InterAct. This litigation,
like any litigation brought to protect and enforce our intellectual property
rights, could be costly, time-consuming and distracting to management and could
result in the impairment or loss of portions of our intellectual property. In
addition, any litigation in which we are accused of infringement may cause
product shipment delays, require us to develop non-infringing technology or
require us to enter into royalty or license agreements even before the issue of
infringement has been decided on the merits. If any litigation were not resolved
in our favor, we could become subject to substantial damage claims from third
parties and indemnification claims from our licensees. We and our licensees
could be enjoined from the continued use of the technology at issue without a
royalty or license agreement. Royalty or license agreements, if required, might
not be available
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on acceptable terms, or at all. If a third party claiming infringement against
us prevailed and we could not develop non-infringing technology or license the
infringed or similar technology on a timely and cost-effective basis, our
expenses would increase and our revenues could decrease.
We attempt to avoid infringing known proprietary rights of third parties.
However, third parties may hold, or may in the future be issued, patents that
could be infringed by our products or technologies. Any of these third parties
might make a claim of infringement against us with respect to the products that
we manufacture and the technologies that we license. From time to time, we have
received letters from companies, several of which have significantly greater
financial resources than we do, asserting that some of our technologies, or
those of our licensees, infringe their intellectual property rights. Certain of
our licensees have received similar letters from these or other companies. Such
letters may influence our licensees' decisions whether to ship products
incorporating our technologies. Although none of these matters has resulted in
litigation to date, any of these notices, or additional notices that we could
receive in the future from these or other companies, could lead to litigation.
FAILURE TO QUALIFY FOR POOLING-OF-INTERESTS ACCOUNTING TREATMENT WITH RESPECT TO
OUR RECENT ACQUISITION OF HT MEDICAL MAY HARM OUR FUTURE OPERATING RESULTS.
We have accounted for our recent acquisition of HT Medical as a
pooling-of-interests business combination. Under the pooling-of-interests method
of accounting, each of Immersion and HT Medical's historical recorded assets and
liabilities are carried forward to the combined company at their recorded
amounts. In addition, the operating results of the combined company will include
Immersion's and
HT Medical's operating results for all of fiscal 2000, and Immersion's and HT
Medical's historical reported operating results for prior periods have been
combined and restated as the operating results of the combined company.
Events may occur that cause the HT Medical merger to no longer qualify for
pooling-of-interests accounting treatment. In that case, we would be required to
account for the acquisition under the purchase method of accounting. Under that
method, we would record the estimated fair value of Immersion common stock
issued in the merger as the cost of acquiring the business of HT Medical. That
cost would be allocated to the net assets acquired, with the excess of the
estimated fair value of Immersion common stock over the fair value of net assets
acquired recorded as goodwill or other intangible assets. To the extent goodwill
and other intangibles are recorded on Immersion's financial statements,
Immersion would be required to take a noncash charge to earnings every year for
periods of up to 5 years until the full values of this goodwill and other
intangibles have been fully amortized. The fair value of Immersion common stock
issued in the merger is much greater than the historical net book value at which
HT Medical carried its assets in its accounts. Therefore, purchase accounting
treatment would result in charges to operations of the combined company for
several years compared to pooling-of-interests accounting treatment.
ROBERT O'MALLEY, OUR CHIEF EXECUTIVE OFFICER AND PRESIDENT, RECENTLY JOINED US
AND IF THERE ARE DIFFICULTIES WITH THIS LEADERSHIP TRANSITION IT COULD IMPEDE
THE EXECUTION OF OUR BUSINESS STRATEGY.
Bob O'Malley, our Chief Executive Officer and President, joined us in
October 2000. Our success will depend to a significant extent on Mr. O'Malley's
ability to successfully lead and motivate our employees, and to work effectively
with our executive staff. If this leadership transition is not successful, our
ability to execute our business strategy would be impeded.
WE DEPEND ON A SINGLE SUPPLIER TO PRODUCE OUR IMMERSION PROCESSORS AND MAY LOSE
CUSTOMERS IF THIS SUPPLIER DOES NOT MEET OUR REQUIREMENTS.
We have one supplier of our custom Immersion Processors, which we develop,
license and sell to improve the performance and to help reduce the cost of
computer peripheral products, such as joysticks and mice, incorporating our
touch-enabling technology. We have limited control over delivery schedules,
quality assurance, manufacturing capacity, yields, costs and misappropriation of
our intellectual property.
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Although our supplier warrants that microprocessors it supplies to us or to our
customers will conform to our specifications and be free from defects in
materials and workmanship for a period of one year from delivery, any delays in
delivery of the processor, quality problems or cost increases could cause us to
lose customers and could damage our relationships with our licensees.
IF WE ARE UNABLE TO CONTINUALLY IMPROVE, AND REDUCE THE COST OF, OUR
TECHNOLOGIES, COMPANIES MAY NOT INCORPORATE OUR TECHNOLOGIES INTO THEIR
PRODUCTS, WHICH COULD IMPAIR OUR REVENUE GROWTH.
Our ability to achieve revenue growth depends on our continuing ability to
improve, and reduce the cost of, our technologies and to introduce these
technologies to the marketplace in a timely manner. If our development efforts
are not successful or are significantly delayed, companies may not incorporate
our technologies into their products and our revenue growth may be impaired.
COMPETITION FROM UNLICENSED PRODUCTS COULD LEAD TO REDUCED PRICES AND SALES
VOLUMES OF OUR LICENSEES' PRODUCTS, WHICH COULD LIMIT OUR REVENUES OR CAUSE OUR
REVENUES TO DECLINE.
Our licensees or other third parties may seek to develop products which
they believe do not require a license under our intellectual property. These
potential competitors may have significantly greater financial, technical and
marketing resources than we do, and the costs associated with asserting our
intellectual property against such products and such potential competitors could
be significant. Moreover, if such alternative designs were determined by a court
not to require a license under our intellectual property, competition from such
unlicensed products could limit or reduce our revenues.
COMPETITION WITH OUR IMMERSION PROCESSORS MAY LEAD TO REDUCED PRICES AND SALES
VOLUMES OF OUR MICROPROCESSORS.
Currently, there are several semiconductor companies manufacturing products
that compete with our microprocessors. Many of these companies have longer
operating histories, substantially greater financial, technical, marketing and
other resources, and greater name recognition than we do. They also may be able
to respond more quickly than we can to changes in technology or customer
requirements. Accordingly, competitive pressures could reduce our market share
or require us to reduce our prices, either of which would impede our ability to
sell our processors on acceptable terms.
WE MIGHT BE UNABLE TO RECRUIT OR RETAIN NECESSARY PERSONNEL, WHICH COULD SLOW
THE DEVELOPMENT AND DEPLOYMENT OF OUR TECHNOLOGIES.
Our ability to develop and deploy our technologies and to sustain our
revenue growth depends upon the continued service of our executive officers and
other key personnel and upon hiring additional key personnel. We intend to hire
additional sales, support, marketing and research and development personnel.
Competition for these individuals is intense, and we may not be able to attract,
assimilate or retain additional highly qualified personnel in the future.
Several of our executive officers and key employees hold stock options with
exercise prices considerably below the current market price of our common stock,
which may impair our ability to retain the services of such employees. In
addition, our technologies are complex and we rely upon the continued service of
our existing engineering personnel to support licensees, enhance existing
technology and develop new technologies.
WE HAVE EXPERIENCED RAPID GROWTH AND CHANGE IN OUR BUSINESS, AND OUR FAILURE TO
MANAGE THIS AND ANY FUTURE GROWTH COULD HARM OUR BUSINESS.
In addition to the employees of HT Medical and Virtual Technologies that we
are currently integrating, we are rapidly increasing the number of our employees
in our San Jose headquarters. Our business may be harmed if we do not integrate
and train our new employees quickly and effectively. We also cannot be sure that
our revenues will continue to grow at a rate sufficient to support the costs
associated with an increasing number of employees. Any future periods of rapid
growth may place significant strains on our managerial, financial, engineering
and other resources. The rate of any future
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expansion, in combination with our complex technologies, may demand an unusually
high level of managerial effectiveness in anticipating, planning, coordinating
and meeting our operational needs as well as the needs of our licensees.
PRODUCT LIABILITY CLAIMS, INCLUDING CLAIMS RELATING TO ALLEGED REPETITIVE STRESS
INJURIES, COULD BE TIME-CONSUMING AND COSTLY TO DEFEND, AND COULD EXPOSE US TO
LOSS.
Claims that consumer products have flaws or other defects that lead to
personal or other injury are common in the computer peripherals industry. If
products that we or our licensees sell cause personal injury, financial loss or
other injury to our or our licensees' customers, the customers or our licensees
may seek damages or other recovery from us. Any claims against us would be
time-consuming, expensive to defend and distracting to management and could
result in damages and injure our reputation or the reputation of our licensees
or their products. This damage could limit the market for our licensees' touch-
enabled products and harm our results of operations. In the past, manufacturers
of peripheral products, such as computer mice, have been subject to claims
alleging that use of their products has caused or contributed to various types
of repetitive stress injuries, including carpal tunnel syndrome. We have not
experienced any product liability claims to date. Although our license
agreements typically contain provisions designed to limit our exposure to
product liability claims, existing or future laws or unfavorable judicial
decisions could limit or invalidate the provisions.
IF WE FAIL TO DEVELOP NEW OR ENHANCED TECHNOLOGIES FOR NEW APPLICATIONS AND
PLATFORMS, WE MAY NOT BE ABLE TO CREATE A MARKET FOR OUR TECHNOLOGIES AND OUR
ABILITY TO GROW AND OUR RESULTS OF OPERATIONS MIGHT BE HARMED.
Our initiatives to develop new and enhanced technologies and to license
technologies for new applications and new platforms may not be successful. Any
new or enhanced technologies may not be favorably received by consumers and
could damage our reputation or our brand. Expanding our technology could also
require significant additional expenses and strain our management, financial and
operational resources. The lack of market acceptance of these efforts or our
inability to generate additional revenues sufficient to offset the associated
costs could harm our results of operations.
OUR STOCK MAY BE VOLATILE.
The stock market has experienced extreme volatility that often has been
unrelated or disproportionate to the performance of particular companies. These
market fluctuations may cause our stock price to decline regardless of our
performance. The market price of our common stock has been, and in the future
could be, significantly affected by factors such as: actual or anticipated
fluctuations in operating results; announcements of technical innovations; new
products or new contracts; sales or the perception in the market of possible
sales of large number of shares of Immersion common stock by insiders or others;
changes in securities analysts' recommendations; changing circumstances
regarding competitors or their customers; governmental regulatory action;
developments with respect to patents or proprietary rights; changes in financial
estimates by securities analysts; and general market conditions. In the past,
following periods of volatility in the market price of a company's securities,
securities class action litigation has been initiated against that company.
OUR EXECUTIVE OFFICERS, DIRECTORS AND MAJOR STOCKHOLDERS RETAIN SIGNIFICANT
CONTROL OVER US, WHICH MAY LEAD TO CONFLICTS WITH OTHER STOCKHOLDERS OVER
CORPORATE GOVERNANCE MATTERS.
Our current directors, officers and more than 5% stockholders, as a group,
beneficially own more than 38% of our outstanding common stock. Acting together,
these stockholders would be able to exercise significant control on matters that
our stockholders vote upon, including the election of directors and mergers or
other business combinations, which could have the effect of delaying or
preventing a third party from acquiring control over or merging with us.
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PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD PREVENT OR DELAY A
CHANGE IN CONTROL, WHICH COULD REDUCE THE MARKET PRICE OF OUR COMMON STOCK.
Provisions in our certificate of incorporation and bylaws may have the
effect of delaying or preventing a change of control or changes in our
management. In addition, certain provisions of Delaware law may discourage,
delay or prevent someone from acquiring or merging with us. These provisions
could limit the price that investors might be willing to pay in the future for
shares.
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FORWARD-LOOKING STATEMENTS
Statements made in this prospectus, and in the documents incorporated in
this prospectus by reference, other than statements of historical fact, are
forward-looking statements. This prospectus, and the documents incorporated in
this prospectus by reference, including the sections entitled "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," contain forward-looking statements. These statements
involve known and unknown risks, uncertainties and other factors that may cause
our actual results, level of activity, performance or achievements to differ
materially from the results, level of activity, performance or achievements
expressed or implied by the forward-looking statements.
These risks and other factors include those listed under "Risk Factors" and
elsewhere in this prospectus and the documents incorporated in this prospectus
by reference. Forward-looking statements may, but do not necessarily, include
words such as "anticipate," "believe," "plan," "expect," "future," "intend,"
"may," "will," "should," "estimate," "predict," "potential," "continue," the
negative of these terms or other comparable terminology. These statements are
only predictions. Actual events or results may differ materially. In evaluating
these statements, you should specifically consider various factors, including
the risks outlined under "Risk Factors." These factors may cause our actual
results to differ materially from any forward-looking statement. Although we
believe the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, level of activity, performance
or achievements. Moreover, neither we nor any other person assumes
responsibility for the accuracy and completeness of any of these forward-looking
statements. We are under no duty to update any of the forward-looking statements
after the date of this prospectus to conform the prior statements to actual
results or revised expectations.
USE OF PROCEEDS
Immersion will not receive any of the proceeds from the sale of the shares
offered by this prospectus. The selling stockholders will receive all of the
proceeds.
SELLING STOCKHOLDERS
On August 31, 2000, we acquired Virtual Technologies through the merger of
our wholly-owned subsidiary with and into Virtual Technologies. In the merger,
each share of Virtual Technologies common stock outstanding immediately prior to
the merger was converted into the right to receive 0.06415616 of a share of our
common stock plus $0.193 in cash. In the merger, we issued approximately 320,584
shares of our common stock and paid approximately $1 million in cash. Of the
shares issued in the merger, 60,000 shares are held in escrow to compensate us
for, among other things, any losses resulting from a breach of Virtual
Technologies' representations, warranties and covenants.
Following the merger, James F. Kramer continued as the President and
Secretary, and Allen Boronkay, Daniel H. Gomez, Nancy Finnie, Jeffrey T. Eder,
Mitchel Slomiak, David Roberts (an officer and shareholder of Ndimention
Simulation, Inc.), Phillippe Chao, Christopher J. Ullrich, Jack Strange and
Raymond Yu continued as employees, of our wholly-owned subsidiary, Virtual
Technologies. Other than their employment relationships and their ownership of
Immersion's securities, none of the selling stockholders has had a material
relationship with Immersion within the past three years.
REGISTRATION RIGHTS AGREEMENT
The shares of Immersion common stock issued in the merger are "restricted
securities," as defined in Rule 144 as promulgated under the Securities Act, and
are not freely transferable. Under a Registration Rights Agreement, dated August
31, 2000, we granted Virtual Technologies' former shareholders the right to one
shelf registration on Form S-3 and piggy-back registration rights in the event
that we file a registration statement under the Securities Act under certain
circumstances. This prospectus covers shares registrable by the selling
stockholders under the Registration Rights Agreement.
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Under the Registration Rights Agreement, we agreed to indemnify the selling
stockholders against certain liabilities arising under the Securities Act. We
are required to reimburse the selling stockholders for certain expenses they
incur in investigating or defending against claims based upon untrue statements
(or alleged untrue statements) or omissions (or alleged omissions) of material
facts concerning us in this prospectus. In addition, we are required to
indemnify the selling stockholders against certain claims based on violations
(or alleged violations) by us of the Securities Act in connection with this
registration.
HOLDINGS OF THE SELLING STOCKHOLDERS
The following table sets forth the aggregate number of shares of our common
stock beneficially owned by the selling stockholders and offered by selling
stockholders under this prospectus.
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED SHARES OWNED AFTER
SELLING STOCKHOLDERS: PRIOR TO OFFERING* OFFERED THE OFFERING*
--------------------- ------------------ ------- -------------
James F. Kramer...................................... 239,943.5063 195,038 44,905.5063
Marc Tremblay........................................ 19,246.0460 15,644 3,602.0460
Allen Boronkay....................................... 12,830.3640 10,429 2,401.3640
Laurence J. Edwards.................................. 7,697.8184 6,257 1,440.8184
Paul L. Korff........................................ 6,286.6683 5,110 1,176.6683
Jack Strange......................................... 2,514.6673 2,044 470.6673
Daniel H. Gomez...................................... 4,299.3205 2,451 1,848.3205
Robert Armas......................................... 513.0546 417 96.0546
Stanley J. Hanel..................................... 2,565.2728 2,085 480.2728
William L. Chapin.................................... 2,565.2728 2,085 480.2728
Lawrence Kuo......................................... 641.0682 521 120.0682
Nancy Finnie......................................... 344.6123 93 251.6123
Jeffrey T. Eder...................................... 770.0341 260 510.0341
Evelyn Chiang........................................ 192.0205 156 36.0205
Mitchel Slomiak...................................... 641.0682 521 120.0682
Ndimention Simulation, Inc........................... 12,830.3640 10,429 2,401.3640
Eric C. Abbott....................................... 615.2655 500 115.2655
Phillippe E. Chao.................................... 225.0136 104 121.0136
ChunXiang Tian....................................... 641.0682 521 120.0682
Ron Carmel........................................... 641.0682 521 120.0682
Christopher J. Ullrich............................... 2,245.2387 1,825 420.2387
Hugo DesRosiers...................................... 320.0341 260 60.0341
Brian Pinkerton...................................... 1,347.1432 1,095 252.1432
Raymond Yu........................................... 257.0136 104 153.0136
Ben Delaney.......................................... 812.0063 660 152.0063
-------------------------
* Less than one percent, except for Mr. Kramer (who holds approximately 1.3%
prior to, and approximately 0.2% after, the offering).
We believe that the persons listed above have sole investment and voting
power with respect to their shares of common stock. The shares listed in the
table as beneficially owned include a total of 60,000 shares currently held in
escrow under the terms of an Escrow Agreement, dated as of August 31, 2000,
among Immersion, James F. Kramer, as Shareholder Representative, and U.S. Trust
Company, National Association, as Escrow Agent. Subject to the satisfaction of
any claims asserted by us, up to 30,000 of the escrowed shares will be
distributed to the Shareholder Representative, on behalf of the selling
stockholders, on the first anniversary of the date of the merger (less any
shares allocated to pending claims), and the remainder of the escrowed shares
will be distributed to the Shareholder Representative, on behalf of the selling
stockholders, on the second anniversary of the date of the merger (less any
shares
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allocated to pending claims). All escrowed shares are held of record by the
Escrow Agent. Applicable percentage ownership in the table is based on
18,476,030 shares of common stock outstanding as of December 27, 2000.
For purposes of this table, beneficial ownership is determined in
accordance with rules of the SEC, and includes voting power and investment power
with respect to shares. Shares issuable upon the exercise of a stockholder's
outstanding stock options that are currently exercisable or become exercisable
within 60 days of December 27, 2000 are considered outstanding for purposes of
calculating the percentage owned by that stockholder, but not for purposes of
calculating the percentage owned by any other person. The number of shares that
are issuable upon the exercise of options that are currently exercisable or
exercisable within such 60 days are: Mr. Gomez -- 1,284 shares, Ms.
Finnie -- 230 shares, Mr. Eder -- 450 shares, Mr. Chao -- 97 shares and Mr.
Yu -- 129 shares.
PLAN OF DISTRIBUTION
The shares of our common stock being offered in this prospectus were
originally issued to the selling stockholders pursuant to an exemption to the
registration requirements of the Securities Act. In accordance with the
Registration Rights Agreement, we have filed a registration statement on Form
S-3 with the SEC to register the securities for resale. The registration
statement covers the resale of the 259,130 shares of our common stock from time
to time on the Nasdaq National Market or in privately negotiated transactions.
In addition, the registration statement covers an indeterminate number of
additional shares of our common stock as may from time to time become issuable
as a result of any stock split, stock dividend, recapitalization, combination,
merger, consolidation, distribution or other similar transactions with respect
to such 259,130 shares. This prospectus forms a part of the registration
statement.
Under the Registration Rights Agreement, the selling stockholders are
entitled to offer and sell shares of our common stock under this prospectus only
at such times as the registration statement is effective (and we have not
advised the selling stockholders to suspend trading) and our employees are
entitled to sell their shares of our common stock under our standard employee
trading policies. We have agreed to use reasonable commercial efforts to keep
the registration statement effective until the earlier of August 31, 2001 or all
shares of our common stock offered in this prospectus have been sold.
Subject to the requirements of the Registration Rights Agreement, the
shares of our common stock offered in this prospectus may be offered and sold
from time to time by the selling stockholders, or by pledgees, donees,
transferees or other successors in interest selling shares received after the
date of this prospectus from a named selling stockholder as a gift, pledge,
partnership distribution or other non-sale related transfer. Such offers and
sales may be made from time to time on a stock exchange, market or trading
facility on which the securities are traded or in privately negotiated
transactions. These sales may be at prices and on terms prevailing in the
market, at prices related to the market price of our common stock or at
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling the securities:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as principal
to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
- an exchange distribution in accordance with the rules of the relevant
exchange;
- privately negotiated transactions;
- broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
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- a combination of any such methods of sale; and
- any other method permitted by law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling stockholders and any broker-dealers or agents that are involved
in selling the securities may be considered to be "underwriters" within the
meaning of the Securities Act in connection with such sales. If so, any
commissions received by such broker-dealers or agents and any profit on the
resale of the securities purchased by them may be considered to be underwriting
commissions or discounts under the Securities Act.
In order to comply with the securities laws of some states, the securities
must be offered or sold only through registered or licensed brokers or dealers.
In addition, in some states, the securities may not be offered or sold unless
they have been registered or qualified for sale in that particular state or
unless an exemption from the registration or qualification requirement is
available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale of shares may not simultaneously
engage in market making activities with respect to our common stock for a period
of two business days prior to the commencement of such distribution. In
addition, the selling stockholders will be subject to applicable provisions of
the Exchange Act, and the rules and regulations thereunder, including, without
limitation, Regulation M, which provisions may limit the timing of purchases and
sales of shares of Immersion's common stock by the selling stockholders.
The selling stockholders will pay all commissions, transfer taxes, and
certain other expenses associated with the sale of securities by them. Under the
terms of the Registration Rights Agreement, we paid the expenses of the
preparation of this prospectus and will also bear the expense of maintaining the
effectiveness of the registration statement of which this prospectus forms a
part.
LEGAL MATTERS
The legality of the issuance of the securities being offered hereby is
being passed upon us by Heller Ehrman White & McAuliffe LLP.
EXPERTS
The financial statements of Immersion Corporation and its consolidated
subsidiaries, except HT Medical Systems, Inc., as of December 31, 1999 and 1998,
and for each of the three years in the period ended December 31, 1999,
incorporated by reference in this prospectus have been audited by Deloitte &
Touche LLP as stated in their reports which are incorporated herein by
reference. The financial statements of HT Medical Systems Inc. (consolidated
with those of the Company) [not presented separately herein] have been audited
by Ernst & Young LLP as stated in their report which is incorporated herein by
reference. Such financial statements of the Company and its consolidated
subsidiaries are incorporated herein in reliance upon the respective reports of
such firms given upon their authority as experts in accounting and auditing. All
of the foregoing firms are independent auditors.
The consolidated financial statements (not presented separately herein) of
HT Medical Systems, Inc. have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon (which contains an explanatory
paragraph describing conditions that raise substantial doubt about the Company's
ability to continue as a going concern as described in Note 11 to the
consolidated financial statements) [not presented separately herein], and are
included in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
documents with the Securities and Exchange Commission. Our filings are available
to the public over the Internet at the SEC's web site at "http://www.sec.gov."
You may read and copy any document that we file with the SEC at the following
SEC public reference facilities:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison
Washington, D.C. 20549 New York, New York 10048 Chicago, Illinois 60661
You can also obtain copies of the documents at prescribed rates by writing
to the SEC's Public Reference Section at 450 Fifth Street, N.W., Washington,
D.C. 20549. Please call 1-800-SEC-0330 for more information on the operation of
the SEC's public reference facilities. You can also inspect copies of our
filings at the Nasdaq Stock Market at 1735 K Street, N.W., Washington, D.C.
20006.
This prospectus is part of a registration statement that we filed with the
SEC (registration no. 333- ). The registration statement contains more
information than this prospectus regarding Immersion and its common stock,
including certain exhibits and schedules. You can get a copy of the registration
statement from the SEC at the address listed above or from the SEC's Internet
web site.
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with the SEC. This means that we can disclose important
information to you by referring you to those documents. Information incorporated
by reference is part of this prospectus. Information that we later file with the
SEC will automatically update and supercede this information.
We incorporate by reference the documents listed below and any future
filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this prospectus and prior to the termination of
the offering of the securities offered in this prospectus:
- Our Annual Report on Form 10-K for the year ended December 31, 1999;
- Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2000;
- Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2000;
- Our Quarterly Report on Form 10-Q for the quarter ended September 30,
2000;
- Our Current Report on Form 8-K dated March 9, 2000;
- Our Current Report on Form 8-K dated August 31, 2000;
- Our Current Report on Form 8-K dated September 29, 2000;
- Our Current Report on Form 8-K dated January 3, 2001; and
- The description of our common stock contained in our registration
statement on Form 8-A12G filed on November 5, 1999 under the Exchange
Act, including any amendment or report filed for the purpose of updating
such description.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address: Immersion Corporation, 801 Fox Lane,
San Jose, California 95131, Attention: Investor Relations, telephone: (408)
467-1900.
Immersion has authorized no one to provide you with any information that
differs from that contained in this prospectus. Accordingly, you should not
relay on any information that is not contained in this prospectus. You should
not assume that the information in this prospectus is accurate as of any date
other than the date of the front cover of this prospectus.
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20
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. THE SELLING STOCKHOLDERS ARE OFFERING TO SELL, AND
SEEKING OFFERS TO BUY, SHARES OF IMMERSION'S COMMON STOCK ONLY IN JURISDICTIONS
WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE
TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF THE SHARES.
----------------------------
TABLE OF CONTENTS
---------------------------
PAGE
----
Our Company........................... 1
Risk Factors.......................... 1
Forward-Looking Statements............ 13
Use of Proceeds....................... 13
Selling Stockholders.................. 13
Plan of Distribution.................. 15
Legal Matters......................... 16
Experts............................... 16
Where You Can Find More Information... 17
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259,130 Shares
IMMERSION CORPORATION
Common Stock
--------------------
PROSPECTUS
--------------------
January , 2001
------------------------------------------------------
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21
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth various expenses in connection with the sale
and distribution of the securities being registered. All of the amounts shown
are estimates except for the Securities and Exchange Commission Registration
Fee.
Securities and Exchange Commission Registration Fee......... $ 470
Accounting Fees............................................. 15,000
Legal Fees and Disbursements................................ 55,000
Miscellaneous............................................... 4,530
-------
Total..................................................... 75,000
=======
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the General Corporation Law of the State of Delaware permits
a corporation, under specified circumstances, to indemnity its directors,
officers, employees or agents against expenses (including attorney's fees),
judgments, fines and amounts paid in settlements actually and reasonably
incurred by them in connection with any action, suit or proceeding brought by
third parties by reason of the fact that they were or are directors, officers,
employees or agents of the corporation or were or are serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, if such directors, officers, employees or agents acted in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no reason to believe their conduct was unlawful. In a derivative
action, i.e., one by or in the right of the corporation, indemnification may be
made only for expenses actually and reasonably incurred by directors, officers,
employees or agents in connection with the defense or settlement of an action or
suit, and only with respect to a matter as to which they shall have acted in
good faith and in a manner they reasonably believed to be in or not opposed to
the best interests of the corporation, unless and only to the extent that the
court in which the action or suit was brought shall determine upon application
that the defendant directors, officers, employees, or agents are fairly and
reasonably entitled to indemnification for such expenses despite such
adjudication of liability.
Immersion's amended and restated bylaw and certificate of incorporation
provide that Immersion shall, to the full extent authorized or permitted by law,
indemnify any current or former director or officer. In addition, Immersion has
entered into agreements to indemnify its directors and executive officers that
provide for indemnification for some types of expenses, including attorney's
fees, judgments fines and settlement amounts incurred in any action or
proceeding, including any action by or in the right of Immersion, arising out of
service as Immersion's directors or executive officers.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of the Registrant in which
indemnification is being sought, nor is the Registrant aware of any threatened
litigation that may result in a claim for indemnification by any director,
officer, employee or other agent of the Registrant.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Registrant
pursuant to the foregoing provisions, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
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ITEM 16. EXHIBITS.
The following documents are filed herewith (unless otherwise indicated) and
made a part of this registration statement.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
4.1 Registration Rights Agreement dated as of August 31, 2000
among Immersion Corporation and the former shareholders of
Virtual Technologies, Inc. party thereto*
5.1 Opinion of Heller Ehrman White & McAuliffe LLP
23.1 Consent of Deloitte & Touche LLP, independent auditors
23.2 Consent of Ernst & Young LLP, independent auditors
23.3 Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (included on page II-4)
-------------------------
* Incorporated by reference from Registrant's Current Report on Form 8-K dated
August 31, 2000.
ITEM 17. UNDERTAKINGS.
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
Provided, however, that paragraphs (i) and (ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
B. That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to section 13(a)
or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offering therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 14 above, or
otherwise, Registrant has been advised that in the opinion of the Securities and
II-2
23
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted against the registrant by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
D. To deliver or cause to be delivered with the prospectus, to each person
to whom the prospectus is sent or given, the latest annual report to security
holders that is incorporated by reference in the prospectus and furnished
pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Exchange Act; and, where interim financial information required to be presented
by Article 3 of Regulation S-X is not set forth in the prospectus, to deliver,
or cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in San Jose, California, on January 2, 2001.
IMMERSION CORPORATION
By /s/ ROBERT O'MALLEY
------------------------------------
Robert O'Malley
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert O'Malley and Victor Viegas,
jointly and severally, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to this
Registration Statement on Form S-3 and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement on Form S-3 has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ ROBERT O'MALLEY President and Chief January 2, 2001
----------------------------------------------------- Executive Officer (Principal
Robert O'Malley Executive Officer)
/s/ VICTOR VIEGAS Chief Financial Officer January 2, 2001
----------------------------------------------------- (Principal Financial and
Victor Viegas Accounting Officer)
/s/ LOUIS ROSENBERG, PH.D. Chairman of the Board of January 2, 2001
----------------------------------------------------- Directors
Louis Rosenberg, Ph.D.
/s/ CHARLES BOESENBERG Director January 2, 2001
-----------------------------------------------------
Charles Boesenberg
/s/ STEVEN BLANK Director December 21, 2000
-----------------------------------------------------
Steven Blank
/s/ JONATHAN RUBINSTEIN Director January 2, 2001
-----------------------------------------------------
Jonathan Rubinstein
II-4
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
4.1 Registration Rights Agreement dated as of August 31, 2000
among Immersion Corporation and the former shareholders of
Virtual Technologies, Inc. party thereto*
5.1 Opinion of Heller Ehrman White & McAuliffe LLP
23.1 Consent of Deloitte & Touche LLP, independent auditors
23.2 Consent of Ernst & Young LLP, independent auditors
23.3 Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (included on page II-4)
-------------------------
* Incorporated by reference from Registrant's Current Report on Form 8-K dated
August 31, 2000.