What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2021-05-10 compared with 2020-11-06 · 41 added, 25 removed, 338 unchanged (16% of the section changed)

12 unchanged sentences

In addition, even if we obtain favorable interim rulings or verdicts, they may be inconsistent with the ultimate resolution of the dispute.

Furthermore, any awards we receive may be subject to obligations to Leidos and fee arrangements with outside counsel.

Also, we cannot assure you that we will not be exposed to claims or sanctions against us which may be costly or impossible for us to defend.

2 unchanged sentences

Our business strategy includes licensing our patents and technology to other companies in order to reach a larger end-user base than we could reach through direct sales and marketing efforts;

as such, our business strategy and revenues will depend on intellectual property licensing fees and royalties for the majority of our revenues.

as such, our business strategy and revenues may depend on intellectual property licensing fees and royalties for the majority of our revenues.

We currently derive minimal revenue from licensing activities, and royalties, and we cannot assure you that we will successfully capitalize on our market opportunities or that our current business strategy will succeed.

Factors that may affect our ability to execute our current business strategy include, but are not limited to, the following:

Although to date we have 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 our existing and pending license agreements may not generate the financial results, we expect.

Factors that may affect our ability to execute our current business strategy include, but are not limited to, the following:

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;

Our patents may expire before we can make our business strategy successful;

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;

24 unchanged sentences

Our business depends on the growth of instant messaging, VoIP, mobile services, streaming video, file transfer and remote desktop and other next-generation Internet-based applications.

A decline in the use of these applications due to complexity or cost of these applications relative to alternate traditional or newly developed communications channels, or development of alternative technologies, could cause a material decline in the number of users in these areas.

A decline in the use of these applications due to complexity or cost relative to alternate traditional or newly developed communications channels, or development of alternative technologies, could cause a material decline in the number of users in these areas.

More aggressive domestic or international regulation of the Internet in general, and Internet telephony providers and services specifically may materially and adversely affect our business, financial condition, operating results, and future prospects .

48 unchanged sentences

For example, the European Commission adopted a General Data Protection Regulation (the “GDPR”) that became fully effective on May 25, 2018, superseding prior EU data protection legislation, imposing more stringent EU data protection requirements, and providing for greater penalties for noncompliance.

The United Kingdom enacted a Data Protection Act that substantially implements the GDPR.

We are evaluating obligations imposed on us by the GDPR and we may be required to incur substantial expense in order to make significant changes to our product and business operations in connection with obtaining and maintaining compliance with the GDPR and similar legislation, such as the UK Data Protection Act, all of which may adversely affect our revenue and product sales.

The United Kingdom has enacted a Data Protection Act and legislation referred to as the UK GDPR that substantially implements the GDPR.

We are evaluating obligations imposed on us by the GDPR and we may be required to incur substantial expense in order to make significant changes to our product and business operations in connection with obtaining and maintaining compliance with the GDPR and similar legislation, such as the UK GDPR and UK Data Protection Act, all of which may adversely affect our revenue and product sales.

Additionally, California recently enacted legislation, the California Consumer Privacy Act (the “CCPA”) that, among other things, requires covered companies to provide new disclosures to California consumers, and afford such consumers new abilities to opt-out of certain sales of personal information.

We cannot fully predict the impact of the CCPA on our business or operations, but it may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply.

Additionally, a new privacy law, the California Privacy Rights Act ("CPRA"), recently was certified by the California Secretary of State to appear on the ballot for the November 3, 2020 election.

If this initiative is approved by California voters, the CPRA would significantly modify the CCPA, potentially resulting in further uncertainty and requiring us to incur additional costs.

More generally, we cannot yet fully determine the impact these or future laws, regulations and standards may have on our business.

Additionally, a new privacy law, the California Privacy Rights Act (the “CPRA”), was approved by California voters in the November 2020 election.

The CPRA significantly modifies the CCPA, creating obligations relating to consumer data beginning on January 1, 2022, with implementing regulations expected on or before July 1, 2022, and enforcement beginning July 1, 2023.

We cannot yet fully determine the impact these or future laws, regulations and standards may have on our business, but they may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply.

Privacy, data protection and information security laws and regulations are often subject to differing interpretations, may be inconsistent among jurisdictions, and may be alleged to be inconsistent with our current or future practices.

27 unchanged sentences

As a result, our revenue may be limited or static.

We have limited technical resources and are at an early stage in commercialization of our GABRIEL Collaboration Suite™.

We have limited technical resources and are at an early stage in commercialization of our GABRIEL products.

Part of our business includes the internal development of commercial products we seek to monetize.

This aspect of our business may require significant capital, time and resources and we cannot guarantee that it will be successful or meet our expectations.

We currently have only one commercial product, the GABRIEL Collaboration Suite™.

As such, we have a small technical team, which may limit our ability to rapidly adapt our product to customer requirements or add new product features to maintain our competitive edge and drive adoption.

69 unchanged sentences

Our international expansion may present challenges and risks, including those inherent in international operations, to us and may require significant attention from management.

For example, the COVID-19 pandemic could disrupt and slow our international expansion and partnership efforts, as our international partners’ businesses could be disrupted.

For example, the COVID-19 pandemic has and could continue to disrupt and slow our international expansion and partnership efforts, as our international partners’ businesses could continue to be disrupted.

We may not be successful in our international partnerships, expansion efforts, and we may incur significant operating expenses in our efforts to expand internationally.

7 unchanged sentences

If we experience any material weaknesses in our internal control over financial reporting in the future or are unable to provide unqualified management or attestation reports about our internal controls, we may be unable to meet financial and other reporting deadlines and may incur costs associated with remediation, and any of which could cause our share price to decline.

Moreover, if we identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses in future periods, the market price of our ordinary shares could decline, and we could be subject to potential delisting by the NYSE and review by the NYSE, the SEC, or other regulatory authorities, which would require the expenditure by us of additional financial and management resources.

As a result, our shareholders could lose confidence in our financial reporting, which would harm our business and the market price of our ordinary shares.

Moreover, if we identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses in future periods, the market price of our common stock could decline, and we could be subject to potential delisting by the NYSE and review by the NYSE, the SEC, or other regulatory authorities, which would require the expenditure by us of additional financial and management resources.

As a result, our shareholders could lose confidence in our financial reporting, which would harm our business and the market price of our common stock.

There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in accordance with U.S.

12 unchanged sentences

and foreign tax law on our business is uncertain and could be adverse, and we will continue to monitor and assess the impact of any such changes .

War, terrorism, other acts of violence, or natural or manmade disasters may affect the markets in which we operates, our clients and our service delivery.

Our business may be adversely affected by instability, disruption or destruction in a geographic region in which we operates, regardless of cause, including war, terrorism, riot, civil insurrection or social unrest, and natural or manmade disasters, including famine, flood, fire, earthquake, storm or pandemic events and spread of disease, such as the COVID-19 pandemic.

War, terrorism, other acts of violence, or natural or manmade disasters may affect the markets in which we operate, our clients and our service delivery.

Our business may be adversely affected by instability, disruption, or destruction in a geographic region in which we operate, regardless of cause, including war, terrorism, riot, civil insurrection, or social unrest, and natural or manmade disasters, including famine, flood, fire, earthquake, storm, or pandemic events and spread of disease, such as the COVID-19 pandemic.

Such events may cause our customers to delay their decisions on spending for the services we provide and give rise to sudden significant changes in regional and global economic conditions and cycles.

12 unchanged sentences

More generally, the COVID-19 pandemic could continue to adversely affect economies and financial markets globally, potentially leading to an economic downturn, which could decrease technology spending and adversely affect our business.

It is not possible at this time to estimate the impact that the COVID-19 pandemic could have on our business, as the impact will depend on future developments, which are highly uncertain and cannot be predicted.

Risks Related to Our Common Stock

2 unchanged sentences

Over the past years, the market price of our common stock has experienced significant fluctuations.

Between October 1, 2019, and September 30, 2020, the reported last adjusted closing price on the NYSE American LLC, and now NYSE, for our common stock ranged between $2.92 and $7.54 per share.

Between April 1, 2020, and March 31, 2021, the reported last adjusted closing price on the NYSE American LLC, and now NYSE, for our common stock ranged between $4.29 and $8.17 per share.

The price of our common stock may continue to be volatile as a result of several factors, some of which are beyond our control.

45 unchanged sentences

We therefore cannot make assurances that our Board of Directors will determine to pay regular or special dividends in the future.

Accordingly, unless our Board of Directors determines to pay dividends, stockholders will be required to look to appreciation of our common stock to realize a gain on their investment.

This appreciation may not occur.

The exercise of our outstanding stock options, RSUs and issuance of new shares would result in a dilution of our current stockholders’ voting power and an increase in the number of shares eligible for future resale in the public market which may negatively impact the market price of our stock.

The exercise of our outstanding vested stock options would dilute the ownership interests of our existing stockholders.

As of September 30, 2020, we had outstanding options to purchase an aggregate of 5,682,521 shares of common stock representing approximately 8% of our total shares outstanding of which 4,184,000 were vested and therefore exercisable.

Accordingly, unless our Board of Directors determines to pay dividends, stockholders will be required to look to appreciation of our common stock to realize a gain on their investment, which may not occur.

The exercise of our outstanding stock options, warrants and RSUs and issuance of new shares would result in a dilution of our current stockholders’ voting power and an increase in the number of shares eligible for future resale in the public market which may negatively impact the market price of our stock.

The exercise of our outstanding vested stock options, warrants and RSUs would dilute the ownership interests of our existing stockholders.

As of March 31, 2021, we had outstanding options, warrants and RSUs to purchase an aggregate of 6,341,844 shares of common stock representing approximately 9% of our total shares outstanding of which 4,674,542 were vested and therefore exercisable.

To the extent outstanding stock options are exercised, additional shares of common stock will be issued, existing stockholders’ percentage voting interests will decline and the number of shares eligible for resale in the public market will increase.

3 unchanged sentences

We expect that our future operating results may also fluctuate due to the same or similar factors.

While we had net income of $287.9 million for the nine months ended September 30, 2020, we had net losses of $19.2 million for 2019 and $25.4 million for 2018, and through the nine month ended September 30, 2020, we had accumulated deficits of $0.6 million.

While we had net income of $280.4 million for the year ended December 31, 2020, we had net losses of $19.2 million for the year ended December 31, 2019, and $26.4 million for the quarter ended March 31, 2021.

As of March 31, 2021, we had accumulated deficits of $34.5 million.

The following include some of the factors that may cause our operating results to fluctuate:

8 unchanged sentences

Because ownership of our common stock is concentrated, investors may have limited influence on stockholder decisions.

As of December 31, 2019, our executive officers and directors beneficially owned approximately 13.2% of our outstanding common stock.

As of March 31, 2021, our executive officers and directors beneficially owned approximately 14% of our outstanding common stock.

In addition, a group of stockholders that, as of December 31, 2007, held 4,766,666 shares, or approximately 7% of our outstanding common stock, have entered into a voting agreement with us that requires them to vote all of their shares of our voting stock in favor of the director nominees approved by our Board of Directors at each director election going forward, and in a manner that is proportional to the votes cast by all other voting shares as to any other matters submitted to the stockholders for a vote.

33 unchanged sentences

If a court were to find this exclusive-forum provision in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm our results of operations.

ITEM 5 — EXHIBITS

Certification of the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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.

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.

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.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

VIRNETX HOLDING CORPORATION

/s/ Kendall Larsen

Kendall Larsen

Chief Executive Officer (Principal Executive Officer)

/s/ Richard H.

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

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors