1058811--3/9/2009--IMMERSION

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We have little or no control or influence on our licensees design, manufacturing, promotion, distribution, or pricing of their products incorporating our touch-enabling technologies, upon which we generate royalty revenue. We may not be able to continue to derive significant revenues from makers of peripherals for popular video gaming platforms. Because we have a fixed payment license with Microsoft, our royalty revenue from licensing in the gaming market and other consumer markets has declined and may further do so if Microsoft increases its volume of sales of touch-enabled gaming products and consumer products at the expense of our other licensees. We generate revenues from touch-enabling components that are sold and incorporated into third-party products. We have little or no control or influence over the design, manufacture, promotion, distribution, or pricing of those third-party products. The terms in our agreements may be construed by our licensees in a manner that is inconsistent with the rights that we have granted to other licensees, or in a manner that may require us to incur substantial costs to resolve conflicts over license terms. If we are unable to enter into new licensing arrangements with our existing licensees and with additional third-party manufacturers for our touch-enabling technologies, our royalty revenue may not grow. Our recently-announced consolidation of our Medical operations may not be successful, and may negatively impact our business Litigation regarding intellectual property rights could be expensive, disruptive, and time consuming; could result in the impairment or loss of portions of our intellectual property; and could adversely affect our business. Our current litigation undertakings are expensive, disruptive, and time consuming, and will continue to be, until resolved, and regardless of whether we are ultimately successful, could adversely affect our business. Product liability claims could be time-consuming and costly to defend and could expose us to loss. Our products are complex and may contain undetected errors, which could harm our reputation and future product sales. The nature of some of our products may also subject us to export control regulation by the U.S. Department of State and the Department of Commerce. Violations of these regulations can result in monetary penalties and denial of export privileges. Compliance with directives that restrict the use of certain materials may increase our costs and limit our revenue opportunities. Because personal computer peripheral products that incorporate our touch-enabling technologies currently work with Microsoft s operating system software, our costs could increase and our revenues could decline if Microsoft modifies its operating system software. If we are unable to develop open source compliant products, our ability to license our technologies and generate revenues would be impaired. The market for certain touch-enabling technologies and touch-enabled products is at an early stage and if market demand does not develop, we may not achieve or sustain revenue growth. If we fail to protect and enforce our intellectual property rights, our ability to license our technologies and generate revenues would be impaired. Certain terms or rights granted in our license agreements or our development contracts may limit our future revenue opportunities. 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 or our technologies may become obsolete, and our ability to grow and our results of operations might be harmed. We have limited engineering, customer service, technical support, quality assurance and manufacturing resources to design and fulfill favorable product delivery schedules and sufficient levels of quality in support of our different product areas. Products and services may not be delivered in a timely way, with sufficient levels of quality, or at all, which may reduce our revenue. The higher cost of products incorporating our touch-enabling technologies may inhibit or prevent their widespread adoption. Third-party validation studies may not demonstrate all the benefits of our medical training simulators, which could affect customer motivation to buy. Medical licensing and certification authorities may not recommend or require use of our technologies for training and/or testing purposes and certain legislation that may encourage the use of simulators may not become law, significantly slowing or inhibiting the market penetration of our medical simulation technologies. We have limited distribution channels and resources to market and sell our products, and if we are unsuccessful in marketing and selling these products, we may not achieve or sustain product revenue growth. It is difficult for us to predict the sales volume of our distribution channels, which makes it difficult for us to forecast our business. The markets in which we participate or may target in the future are intensely competitive, and if we do not compete effectively, our operating results could be harmed. Winning business is subject to a competitive selection process that can be lengthy and requires us to incur significant expense, and we may not be selected. Automobiles incorporating our touch-enabling technologies are subject to lengthy product development periods, making it difficult to predict when and whether we will receive automotive royalties. We have experienced significant change in our business, and we cannot assure you that these changes will result in increased revenue or profitability. Our international expansion efforts subject us to additional risks and costs. Clent Richardson, our chief executive officer, and other members of our executive management team are relatively new and if there are difficulties with this leadership transition it could impede the execution of our business strategy. We might be unable to retain or recruit necessary personnel, which could slow the development and deployment of our technologies. If our facilities were to experience catastrophic loss, our operations would be seriously harmed. 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 stock price may fluctuate regardless of our performance. 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. We may engage in acquisitions that could dilute stockholders interests, divert management attention, or cause integration problems. Failure to maintain effective internal controls in accordance with section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price. We have determined that our internal control over financial reporting is currently ineffective. As our business grows, such growth may place a significant strain on our management and operations and, as a result, our business may suffer.

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1058811--3/9/2009--IMMERSION_CORP