UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024.

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-33852

VirnetX Holding Corporation

(Exact name of registrant as specified in its charter)

Delaware		77-0390628
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

308 Dorla Court, Suite 206 Zephyr Cove, Nevada		89448
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (775) 548-1785

Former name, former address and former fiscal year, if changed since last report: N/A

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	VHC	NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒
Emerging growth company ☐	Smaller reporting company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

3,680,661 shares of the registrant’s Common Stock were outstanding as of May 7, 2024.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have included or incorporated by reference in this Quarterly Report on Form 10-Q (this “Report”), and from time to time we may make statements that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are based upon our current expectations, estimates, assumptions, and beliefs concerning future events and conditions and may discuss, among other things, anticipated future performance (including sales and earnings), products, expected growth, future business plans and costs,(including investments, marketing and business development, staffing strategies and entering into another sector), the impact of potential and ongoing litigation, the expectation of future stockholder distributions, statements regarding the Company’s efforts and ability to maintain compliance with the New York Stock Exchange (“NYSE”) continued listing standard, our beliefs and statements regarding general industry and market conditions and growth rates, as well as general domestic and international economic conditions. Any statement that is not historical in nature is a forward-looking statement and may be identified by the use of words and phrases such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “will likely result in,” and similar expressions. Readers are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements are necessarily subject to risks, uncertainties, and other factors, many of which are outside our control, which could cause actual results to differ materially from such statements and from our historical results and experience. These risks, uncertainties and other factors include, but are not limited to those described in Item 1A - Risk Factors of this Report and elsewhere in this Report and those described from time to time in our reports filed with the Securities and Exchange Commission (the “SEC”). Readers are cautioned that it is not possible to predict or identify all the risks, uncertainties and other factors that may affect future results and that the risks described herein should not be considered a complete list. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Among others, the forward-looking statements appearing in this Report that may not occur include statements that:

•

We have undertaken activities to commercialize our products and patent portfolio in and outside the United States including VirnetX One™, War Room™, VirnetX Matrix™ and our Secured Domain Name Registry and Technology. These statements may imply that the worldwide market for our commercialized products is large and will result in significant future revenue for us. However, commercialization of products such as ours is subject to significant obstacles and risks and may prevent significant future revenues for us.

EXCEPT AS REQUIRED BY LAW, WE UNDERTAKE NO OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENT AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

VIRNETX HOLDING CORPORATION

INDEX

		Page

PART I — FINANCIAL INFORMATION		2
	Item 1 — Financial Statements	2
	Condensed Consolidated Balance Sheets at March 31, 2024 (unaudited) and December 31, 2023	2
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023 (unaudited)	3
	Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2024 and 2023 (unaudited)	4
	Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2024 and 2023 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements	7
	Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
	Item 3 — Quantitative and Qualitative Disclosures About Market Risk	19
	Item 4 — Controls and Procedures	19

PART II — OTHER INFORMATION		20
	Item 1 — Legal Proceedings	20
	Item 1A — Risk Factors	20
	Item 5 — Other Information	32
	Item 6 — Exhibits	33

SIGNATURES		34

	As of March 31, 2024			As of December 31, 2023
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	27,593		$	26,289
Investments available for sale		22,412			27,258
Accounts receivables		—			2
Prepaid expenses and other current assets		367			282
Total current assets		50,372			53,831
Other investments at cost		2,500			2,500
Prepaid expenses and other assets		9,341			4,014
Property and equipment, net		62			67
Total assets	$	62,275		$	60,412

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	490		$	440
Accrued payroll and related expenses		324			316
Other liabilities, current		6,215			498
Total current liabilities		7,029			1,254

Other liabilities		3,062			3,145
Total liabilities		10,091			4,399
Commitments and contingencies (Note 4)

Stockholders’ equity:
Preferred stock, par value $0.0001 per share Authorized: 10,000,000 shares at March 31, 2024 and December 31, 2023; Issued and outstanding: 0 shares at March 31, 2024 and December 31, 2023		—			—
Common stock, par value $0.0001 per share Authorized: 100,000,000 shares at March 31, 2024 and December 31, 2023; Issued and outstanding: 3,680,661 shares at March 31, 2024 and 3,618,431 at December 31, 2023		—			—
Additional paid-in capital		243,005			242,520
Accumulated deficit		(190,786	)		(186,495	)
Accumulated other comprehensive loss		(35	)		(12	)
Total stockholders’ equity		52,184			56,013
Total liabilities and stockholders’ equity	$	62,275		$	60,412

	Three Months Ended March 31,
	2024			2023
Revenue	$	2		$	2
Operating expense:
Research and development		1,268			1,368
Selling, general and administrative		3,660			4,548
Total operating expense		4,928			5,916
Loss from operations		(4,926	)		(5,914	)
Interest and other income, net		635			1,369
Loss before taxes		(4,291	)		(4,545	)
Income tax benefit		—			78
Net loss	$	(4,291	)	$	(4,467	)
Basic loss per share	$	(1.19	)	$	(1.25	)
Diluted loss per share	$	(1.19	)	$	(1.25	)
Weighted average shares outstanding - basic		3,616			3,571
Weighted average shares outstanding - diluted		3,616			3,571

	March 31, 2024
	Adjusted Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cash and Cash Equivalents		Investments Available for Sale
Cash	$	3,303	$	—	$	—		$	3,303	$	3,303	$	—
Level 1:
Mutual funds		20,036		—		—			20,036		20,036		—
U.S. agency and treasury securities		26,676		—		(12	)		26,666		4,254		22,412
		46,712		—		(12	)		46,702		24,290		22,412
Total	$	50,015	$	—	$	(12	)	$	50,005	$	27,593	$	22,412

	December 31, 2023
	Adjusted Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cash and Cash Equivalents		Investments Available for Sale
Cash	$	1,452	$	—	$	—		$	1,452	$	1,452	$	—
Level 1:
Mutual funds		20,040		—		—			20,040		20,040		—
U.S. agency and treasury securities		32,046		27		(18	)		32,055		4,797		27,258
		52,086		27		(18	)		52,095		24,837		27,258
Total	$	53,538	$	27	$	(18	)	$	53,547	$	26,289	$	27,258

Warrants Issued				Exercise Price				Outstanding and Exercisable December 31, 2023				Issued				Exercised				Terminated / Cancelled				Outstanding and Exercisable March 31, 2024			Expiration Date
	1,250			$	115				1,250				—				—				—				1,250		April 30, 2025

Due in 2024	$	481
Due in 2025		6,946
Due in 2026		927
Due in 2027		954
Due in 2028		983
Thereafter		335
		10,626
Less imputed interest		(1,353	)
Total	$	9,273

	Three Months Ended
	March 31,
	2024			2023
Numerator:
Net (loss)	$	(4,291	)	$	(4,467	)

Denominator:
Weighted-average basic shares outstanding		3,616			3,571
Effect of dilutive securities		—			—
Weighted-average diluted shares		3,616			3,571

Basic (loss) per share	$	(1.19	)	$	(1.25	)
Diluted (loss) per share	$	(1.19	)	$	(1.25	)

	VIRNETX HOLDING CORPORATION

	By:	/s/ Kendall Larsen
		Name	Kendall Larsen

			Chief Executive Officer (Principal Executive Officer)

	By:	/s/ Katherine Allanson
		Name	Katherine Allanson

			Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Date: May 15, 2024

	Three Months Ended March 31,
	2024			2023
Total shareholders’ equity, beginning balances	$	56,013		$	152,244

Common stock and additional paid-in capital:
Beginning balances		242,520			239,753
Common stock issued for options/RSUs/restricted stock, net		(3	)		—
Stock-based compensation		488			682
Ending balances		243,005			240,435

Accumulated deficit:
Beginning balances		(186,495	)		(87,195	)
Net loss		(4,291	)		(4,467	)
Dividends		—			(71,429	)
Ending balances		(190,786	)		(163,091	)

Accumulated other comprehensive loss:
Beginning balances		(12	)		(314	)
Change in unrealized investment (loss) gain, net		(21	)		107
Change in foreign currency translation, net		(2	)		(1	)
Ending balances		(35	)		(208	)

Total shareholders’ equity, ending balances	$	52,184		$	77,136

Dividends per share	$	—		$	20.00

SEC Form 10-Q filed by VirnetX Holding Corp