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Share Name | Share Symbol | Market | Type |
---|---|---|---|
VirnetX Holding Corp | AMEX:VHC | AMEX | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 5.19 | 0 | 01:00:00 |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware
|
77-0390628
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification Number)
|
308 Dorla Court, Suite 206
|
||
Zephyr Cove, Nevada
|
89448
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Large accelerated filer
☐
|
Accelerated filer
☒
|
Non-accelerated filer
☐
|
Smaller reporting company
☐
|
(Do not check if a smaller reporting company)
|
Page
|
||
1
|
||
1
|
||
1
|
||
2
|
||
2
|
||
3
|
||
4
|
||
13
|
||
19
|
||
19
|
||
20
|
||
20
|
||
22
|
||
29
|
||
30
|
||
31
|
As of
June 30, 2016
(unaudited)
|
As of
December 31, 2015
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
9,915
|
$
|
8,726
|
||||
Investments available for sale
|
8,297
|
9,954
|
||||||
Prepaid expenses and other current assets
|
833
|
685
|
||||||
Total current assets
|
19,045
|
19,365
|
||||||
Prepaid expenses, non-current
|
2,567
|
2,759
|
||||||
Property and equipment, net
|
38
|
48
|
||||||
Total assets
|
$
|
21,650
|
$
|
22,172
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable and accrued liabilities
|
$
|
1,495
|
$
|
2,283
|
||||
Accrued payroll and related expenses
|
—
|
1,383
|
||||||
Related-party payable
|
21
|
11
|
||||||
Income tax liability
|
400
|
400
|
||||||
Deferred revenue, current portion
|
1,500
|
1,500
|
||||||
Total current liabilities
|
3,416
|
5,577
|
||||||
Deferred revenue, non-current portion
|
750
|
1,500
|
||||||
Commitments and contingencies (Note 4)
|
—
|
—
|
||||||
Stockholders’ equity:
|
||||||||
Preferred stock, par value $0.0001 per share Authorized: 10,000,000 shares at June 30, 2016 and December 31, 2015, Issued and outstanding: 0 shares at June 30, 2016 and December 31, 2015
|
—
|
—
|
||||||
Common stock, par value $0.0001 per share
|
||||||||
Authorized: 100,000,000 shares at June 30, 2016 and December 31, 2015, Issued and outstanding: 56,435,095 shares and 53,198,835 shares, at June 30, 2016 and December 31, 2015, respectively
|
6
|
5
|
||||||
Additional paid-in capital
|
161,097
|
144,778
|
||||||
Accumulated deficit
|
(143,617
|
)
|
(129,669
|
)
|
||||
Accumulated other comprehensive loss
|
(2
|
)
|
(19
|
)
|
||||
Total stockholders’ equity
|
17,484
|
15,095
|
||||||
Total liabilities and stockholders’ equity
|
$
|
21,650
|
$
|
22,172
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
2016
|
June 30,
2015
|
June 30,
2016
|
June 30,
2015
|
|||||||||||||
Revenue
|
$
|
398
|
$
|
400
|
$
|
773
|
$
|
775
|
||||||||
Operating expense:
|
||||||||||||||||
Royalty expense
|
—
|
4,236
|
—
|
4,236
|
||||||||||||
Research and development
|
481
|
417
|
931
|
809
|
||||||||||||
Selling, general and administrative
|
5,270
|
5,314
|
13,814
|
11,057
|
||||||||||||
Total operating expense
|
5,751
|
9,967
|
14,745
|
16,102
|
||||||||||||
Loss from operations
|
(5,353
|
)
|
(9,567
|
)
|
(13,972
|
)
|
(15,327
|
)
|
||||||||
Loss on change in value of derivative liability
|
—
|
—
|
—
|
(117
|
)
|
|||||||||||
Interest income, net
|
16
|
21
|
31
|
45
|
||||||||||||
Loss before taxes
|
(5,337
|
)
|
(9,546
|
)
|
(13,941
|
)
|
(15,399
|
)
|
||||||||
Provision for income tax
|
—
|
—
|
(7
|
)
|
(2
|
)
|
||||||||||
Net loss
|
$
|
(5,337
|
)
|
$
|
(9,546
|
)
|
$
|
(13,948
|
)
|
$
|
(15,401
|
)
|
||||
Basic and diluted loss per share
|
$
|
(0.10
|
)
|
$
|
(0.18
|
)
|
$
|
(0.25
|
)
|
$
|
(0.30
|
)
|
||||
Weighted average shares outstanding basic and diluted
|
55,712
|
52,160
|
54,924
|
52,093
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
2016
|
June 30,
2015
|
June 30,
2016
|
June 30,
2015
|
|||||||||||||
Net loss
|
$
|
(5,337
|
)
|
$
|
(9,546
|
)
|
$
|
(13,948
|
)
|
$
|
(15,401
|
)
|
||||
Other comprehensive income (loss):
|
||||||||||||||||
Change in equity adjustment from foreign currency translation, net of tax
|
4
|
(3
|
)
|
3
|
(3
|
)
|
||||||||||
Change in unrealized gain on investments, net of tax
|
3
|
—
|
14
|
7
|
||||||||||||
Total other comprehensive income gain (loss)
|
7
|
(3
|
)
|
17
|
4
|
|||||||||||
Comprehensive loss
|
$
|
(5,330
|
)
|
$
|
(9,549
|
)
|
$
|
(13,931
|
)
|
$
|
(15,397
|
)
|
Six Months
Ended
June 30,
2016
|
Six Months
Ended
June 30,
2015
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$
|
(13,948
|
)
|
$
|
(15,401
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation
|
15
|
13
|
||||||
Amortization of warrant issuance costs
|
30
|
30
|
||||||
Stock-based compensation
|
2,556
|
3,437
|
||||||
Change in value of derivative liability
|
—
|
117
|
||||||
Changes in assets and liabilities:
|
||||||||
Prepaid expenses and other assets
|
14
|
(17
|
)
|
|||||
Income tax liability
|
—
|
(13
|
)
|
|||||
Accounts payable and accrued liabilities
|
(788
|
)
|
(2,803
|
)
|
||||
Related-party payable
|
10
|
(81
|
)
|
|||||
Payroll accrual
|
(1,383
|
)
|
—
|
|||||
Royalty payable
|
—
|
1,889
|
||||||
Deferred revenue
|
(750
|
)
|
(750
|
)
|
||||
Net cash used in operating activities
|
(14,244
|
)
|
(13,579
|
)
|
||||
Cash flows from investing activities:
|
||||||||
Purchase of property and equipment
|
(5
|
)
|
(4
|
)
|
||||
Purchase of investments
|
(5,195
|
)
|
(4,921
|
)
|
||||
Proceeds from sale or maturity of investments
|
6,870
|
12,459
|
||||||
Net cash provided by investing activities
|
1,670
|
7,534
|
||||||
Cash flows from financing activities:
|
||||||||
Proceeds from warrant exercise
|
—
|
431
|
||||||
Proceeds from exercise of stock options
|
20
|
—
|
||||||
Proceeds from sale of common stock
|
13,743
|
—
|
||||||
Net cash provided by financing activities
|
13,763
|
431
|
||||||
Net change in cash and cash equivalents
|
1,189
|
(5,614
|
)
|
|||||
Cash and cash equivalents, beginning of period
|
8,726
|
18,658
|
||||||
Cash and cash equivalents, end of period
|
$
|
9,915
|
$
|
13,044
|
||||
Non-cash transactions
|
||||||||
Fair value of warrants issued for services
|
$
|
—
|
$
|
121
|
Deferred Revenue, December 31, 2015
|
$
|
3,000
|
||
Less: Amount amortized as revenue
|
750
|
|||
Deferred Revenue, June 30, 2016
|
$
|
2,250
|
June 30, 2016
|
||||||||||||||||||||||||
Adjusted
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Fair
Value
|
Cash
and Cash
Equivalents
|
Investments
Available
for Sale
|
|||||||||||||||||||
Cash
|
$
|
5,790
|
$
|
-
|
$
|
-
|
$
|
5,790
|
$
|
5,790
|
$
|
-
|
||||||||||||
Level 1:
|
||||||||||||||||||||||||
Mutual funds
|
3,185
|
-
|
-
|
3,185
|
3,185
|
-
|
||||||||||||||||||
U.S. government securities
|
1,805
|
3
|
-
|
1,808
|
-
|
1,808
|
||||||||||||||||||
U.S. agency securities
|
7,424
|
5
|
-
|
7,429
|
940
|
6,489
|
||||||||||||||||||
12,414
|
8
|
-
|
12,422
|
4,125
|
8,297
|
|||||||||||||||||||
Total
|
$
|
18,204
|
$
|
8
|
$
|
-
|
$
|
18,212
|
$
|
9,915
|
$
|
8,297
|
December 31, 2015
|
||||||||||||||||||||||||
Adjusted
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Fair
Value
|
Cash
and Cash
Equivalents
|
Investments
Available
for Sale
|
|||||||||||||||||||
Cash
|
$
|
3,296
|
$
|
—
|
$
|
—
|
$
|
3,296
|
$
|
3,296
|
$
|
—
|
||||||||||||
Level 1:
|
||||||||||||||||||||||||
Mutual funds
|
5,005
|
—
|
—
|
5,005
|
5,005
|
—
|
||||||||||||||||||
U.S. government securities
|
1,806
|
—
|
(3
|
)
|
1,803
|
—
|
1,803
|
|||||||||||||||||
U.S. agency securities
|
8,579
|
1
|
(4
|
)
|
8,576
|
425
|
8,151
|
|||||||||||||||||
15,390
|
1
|
(7
|
)
|
15,384
|
5,430
|
9,954
|
||||||||||||||||||
Total
|
$
|
18,686
|
$
|
1
|
$
|
(7
|
)
|
$
|
18,680
|
$
|
8,726
|
$
|
9,954
|
Original
Number
of
Warrants
Issued
|
Exercise
Price per
Common
Share
|
Exercisable at
December 31,
2015
|
Became
Exercisable
|
Exercised
|
Terminated /
Cancelled /
Expired
|
Exercisable
at June 30,
2016
|
Expiration
Date
|
||||||||||||||||||||
25,000
|
$
|
7.00
|
25,000
|
—
|
—
|
—
|
25,000
|
April 2020
|
|||||||||||||||||||
25,000
|
—
|
—
|
—
|
25,000
|
● | Although we have to date entered into a limited number of settlement and license agreements, we may not be successful in entering into further licensing relationships, or if we are successful in entering into such relationships, the acquisition of them may be expensive, and they, as well as our existing settlement and license agreements may not generate the financial results we expect; |
● | Third parties may challenge the validity of our patents; |
● | The pendency of our various litigations may cause potential licensees not to do business with us; |
● | We face, and we expect to continue to face, intense competition from new and established competitors who may have superior products and services or better marketing, financial or other capacities than we do; and |
● | It is possible that one or more of our potential customers or licensees develops or otherwise sources products or technologies similar to, competitive with or superior to ours. |
● | New legislation, regulations or rules related to obtaining patents or enforcing patents could significantly increase our operating costs and decrease our revenue. For instance, the United States Supreme Court has recently modified some tests used by the United States Patent and Trademark Office (“USPTO”) in granting patents during the past 20 years which may decrease the likelihood that we will be able to obtain patents and increase the likelihood of challenge of any patents we obtain or license. In addition, the United States recently enacted sweeping changes to the United States patent system under the Leahy-Smith America Invents Act (“AIA”), including changes that transition the United States from a “first-to-invent” system to a “first to file” system and alter the processes for challenging issued patents |
● | More patent applications are filed each year resulting in longer delays in getting patents issued by the USPTO. |
● | Federal courts are becoming more crowded, and as a result, patent enforcement litigation is taking longer. |
● | As patent enforcement becomes more prevalent, it may become more difficult for us to voluntarily license our patents. |
● | The need to educate potential customers about our patent rights and our product and service capabilities; |
● | Customers’ willingness to invest potentially substantial resources and modify their network infrastructures to take advantage of our products; |
● | Customers’ budgetary constraints; |
● | The timing of customers’ budget cycles; |
● | Delays caused by customers’ internal review processes; and |
● | Long sales cycles that may increase the risk that our financial resources are exhausted before we are able to generate significant revenue. |
· | generate revenues or profit from product sales; |
· | drive adoption of our products; |
· | attract and retain customers for our products; |
· | provide appropriate levels of customer training and support for our products; |
· | implement an effective marketing strategy to promote awareness of our products; |
· | focus our research and development efforts in areas that generate returns on our efforts; |
· | anticipate and adapt to changes in our market; and |
· | protect our products from any system failures or other breaches. |
● | power loss, transmission cable cuts and other telecommunications failures; |
● | damage or interruption caused by fire, earthquake, and other natural disasters; |
● | computer viruses or software defects; and |
● | physical or electronic break-ins, sabotage, intentional acts of vandalism, terrorist attacks and other events beyond our control |
● | developments in any then-outstanding litigation; |
● | quarterly variations in our operating results; |
● | large purchases or sales of common stock or derivative transactions related to our stock; |
● | actual or anticipated announcements of new products or services by us or competitors; |
● | general conditions in the markets in which we compete; and |
● | general economic and financial conditions |
● | the outcome of actions to enforce our intellectual property rights currently in progress or that we may undertake in the future, and the timing thereof; |
● | the amount and timing of receipt of license fees from potential infringers, licensees or customers; |
● | the rate of adoption of our patented technologies; |
● | the number of new license arrangements we may execute, or that may expire, within a particular period and the scope of those licenses, including the number of our patents which are licensed, the extent of prior infringement of our patent rights, royalty rates, timing of payment obligations, expiration date etc; |
● | the success of a licensee in selling products that use our patented technologies; and |
● | the amount and timing of expenses related to our patent filings and enforcement proceedings, including litigation, related to our intellectual property rights. |
● | A staggered Board of Directors : This means that only one or two directors (since we have a five-person Board of Directors) will be up for election at any given annual meeting. This has the effect of delaying the ability of stockholders to effect a change in control of us because it would take two annual meetings to effectively replace a majority of the Board of Directors. |
● | Blank check preferred stock : Our Board of Directors has the authority to establish the rights, preferences and privileges of our 10,000,000 authorized, but unissued, shares of preferred stock. Therefore, this stock may be issued at the discretion of our Board of Directors with preferences over your shares of our common stock in a manner that is materially dilutive to you. In addition, blank check preferred stock can be used to create a “poison pill” which is designed to deter a hostile bidder from buying a controlling interest in our stock without the approval of our Board of Directors. We have not adopted such a “poison pill;” but our Board of Directors has the ability to do so in the future, very rapidly and without stockholder approval. |
● | Advance notice requirements for director nominations and for new business to be brought up at stockholder meetings : Stockholders wishing to submit director nominations or raise matters to a vote of the stockholders must provide notice to us within very specific date windows and in very specific form in order to have the matter voted on at a stockholder meeting. This has the effect of giving our Board of Directors and management more time to react to stockholder proposals generally and could also have the effect of disregarding a stockholder proposal or deferring it to a subsequent meeting to the extent such proposal is not raised properly. |
● | No stockholder actions by written consent : No stockholder or group of stockholders may take actions rapidly and without prior notice to our Board of Directors and management or to the minority stockholders. Along with the advance notice requirements described above, this provision also gives our Board of Directors and management more time to react to proposed stockholder actions. |
● | Super majority requirement for stockholder amendments to the By-laws : Stockholder proposals to alter or amend our By-laws or to adopt new By-laws can only be approved by the affirmative vote of at least 66 2/3% of the outstanding shares of our common stock. |
● | No ability of stockholders to call a special meeting of the stockholders : Only the Board of Directors or management can call special meetings of the stockholders. This could mean that stockholders, even those who represent a significant percentage of our shares of common stock, may need to wait for the annual meeting before nominating directors or raising other business proposals to be voted on by the stockholders. |
Exhibit
Number
|
Description
|
31.1
|
Certification of the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1*
|
Certification of the President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2*
|
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101
|
Interactive Data Files
|
* | This exhibit is furnished herewith, but not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section. Such certifications will not be deemed to be incorporated by reference in any filing under the Securities Act or the Exchange Act, except to the extent that we explicitly incorporate them by reference. |
VIRNETX HOLDING CORPORATION
|
|||
By:
|
/s/ Kendall Larsen
|
||
Name
|
Kendall Larsen
|
||
Title
|
Chief Executive Officer (Principal Executive Officer)
|
||
By:
|
/s/ Richard H. Nance
|
||
Name
|
Richard H. Nance
|
||
Title
|
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
|
||
Date: August 09, 2016
|
* | This exhibit is furnished herewith, but not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section. Such certifications will not be deemed to be incorporated by reference in any filing under the Securities Act or the Exchange Act, except to the extent that we explicitly incorporate them by reference. |
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