Common Stock pursuant to the Backstop Commitment, the Private Investment and the Debt Conversion. In light of the Backstop Commitment, we anticipate that we will receive aggregate gross proceeds
of $45 million if the Rights Offering is completed, whether or not any Subscription Rights holders exercise their Subscription Rights.
Pursuant to
the Purchase Agreement, upon closing of the Rights Offering, Immersion and Vital have also agreed to purchase $45 million and $5 million, respectively, in shares of our Common Stock, at the Subscription Price, in a private placement exempt
from the registration requirements under the Securities Act and separate from the Rights Offering. The Private Investment is in addition to shares of Common Stock purchased by Immersion pursuant to the Immersion Backstop Commitment, if any. In
addition, subject to the terms and conditions of the Purchase Agreement, upon closing of the Rights Offering, the Company and Lien Purchasers will convert all outstanding principal and any accrued and unpaid interest under the Term Credit Agreement,
totaling approximately $34 million as of the date of this prospectus, into a number of new shares of Common Stock equal to the quotient of the Rollover Debt Amount divided by the Subscription Price. Such Rollover Shares will be issued to each of
TopLids and Vital pro rata based on its pro rata portion of the Rollover Debt Amount. Accordingly, upon closing of the Transactions, all Obligations (as defined in the Term Credit Agreement) under the Loan Documents (as defined in the Term Credit
Agreement) (other than Obligations which, by their express terms, survive termination of the Term Credit Agreement or such other Loan Documents), will be deemed paid in full and all Loan Documents will be terminated. Immersion and Vital are not
current stockholders of the Company. TopLids and/or its affiliates are current stockholders of the Company. Assuming no stockholders exercise their Subscription Rights, Immersion, TopLids and Vital will own 60.9%, 17.2% and 12.4% (including shares
of Common Stock beneficially owned by their respective affiliates), respectively, of our Common Stock outstanding following the closing of the Rights Offering, after giving effect to the Backstop Commitment, the Debt Conversion and the Private
Investment.
Following the consummation of the Transactions, an aggregate of approximately 2,575,050,259 shares of Common Stock will be issued pursuant to
the Rights Offering and the Purchase Agreement. Specifically, 900,000,000 shares of Common Stock will be issued as a result of the Rights Offering and, if applicable, the Backstop Commitment, 1,000,000,000 shares of Common Stock will be issued
pursuant to the Private Investment, and approximately 675,050,259 shares of Common Stock will be issued pursuant to the Debt Conversion.
We have
agreed to pay Immersion and Selz commitment fees of $2,450,000 and $350,000, respectively, in consideration for the Backstop Commitment, and to reimburse Immersion, Vital and Outerbridge for all documented out-of-pocket costs, fees and expenses incurred by them in connection with the transactions contemplated by the Purchase Agreement; provided, that such reimbursement shall not exceed, with respect to
Immersion, $2,450,000 in the aggregate ($1,200,000 if the deal does not close), net of any expense amount previously paid by the Company to Immersion, with respect to Vital, $200,000 in the aggregate, and with respect to Outerbridge, $250,000 in the
aggregate. For more information regarding the Purchase Agreement and related agreements, see the section entitled The Purchase Agreement and Related Agreements.
May I transfer or sell my Subscription Rights if I do not want to purchase any shares?
No.
What should I do if I want to participate in the Rights
Offering but my shares are held in the name of my broker, custodian bank or other nominee?
If you hold shares of our Common Stock through a broker,
custodian bank or other nominee, we will ask your broker, custodian bank or other nominee to notify you of the Rights Offering. If you wish to exercise your Subscription Rights, you will need to have your broker, custodian bank or other nominee act
for you. To indicate your decision, you should complete and return to your broker, custodian bank or other nominee relevant forms