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Item 9A. Controls and Procedures

2022-03-16 compared with 2021-03-16 · 104 added, 69 removed, 87 unchanged (67% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, December 31, 2020.

The purpose of this evaluation was to determine whether as of December 31, 2020 our disclosure controls and procedures were effective to provide reasonable assurance that the information we are required to disclose in our filings with the SEC, (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2020, our disclosure controls and procedures were effective.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation

of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, December 31, 2021.

The purpose of this evaluation was to determine whether as of December 31, 2021 our disclosure controls and procedures were effective to provide reasonable

assurance that the information we are required to disclose in our filings with the SEC, (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our

management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2021, our disclosure controls and

procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting (as such term is defined in rules 13a-15(f) under the Securities Exchange Act of 1934, as amended) during the fiscal year ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

There were no changes in our internal controls over financial reporting (as such term is defined in rules 13a-15(f) under the Securities Exchange Act of 1934, as

amended) during the fiscal year ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.

Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America.

Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions;

Internal control over financial

reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America.

Internal control over

financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions;

providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements;

providing reasonable assurance that receipts and expenditures of Company assets are made in accordance with management authorization;

and providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis.

Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.

Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2020.

There were no changes in our internal control over financial reporting during the period ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

and providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could

have a material effect on our financial statements would be prevented or detected on a timely basis.

Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of

our financial statements would be prevented or detected.

Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in

Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, management concluded that the Company’s internal control over financial reporting was

effective as of December 31, 2021.

There were no changes in our internal control over financial reporting during the period ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control

over financial reporting.

Farber Hass Hurley LLP has audited our internal control over financial reporting as of December 31, 2021;

1 unchanged sentence

Other Information

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Directors, Executive Officers and Corporate Governance

The information required by this item will be contained in our definitive proxy statement to be filed with the SEC in connection with our 2020 Annual Meeting of Stockholders (the “Proxy Statement”), which is expected to be filed not later than 120 days after the end of our fiscal year ended December 31, 2020 and is incorporated in this report by reference.

The information required by this item will be contained in our definitive proxy statement to be filed with the SEC in connection with our 2022 Annual Meeting of

Stockholders (the “Proxy Statement”), which is expected to be filed not later than 120 days after the end of our fiscal year ended December 31, 2021 and is incorporated in this report by reference.

Executive Compensation

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Securities Authorized for Issuance Under the Equity Compensation Plans

We have a stock incentive plan for employees and others called the “VirnetX Holding Corporation 2013 Stock Plan”, or the Plan, which has been approved by our stockholders.

The Plan provides for the granting of up to 16,624,469 shares of our common stock, including stock options and restricted stock units , and will expire in 2023.

We have an equity incentive plan for employees and others called the VirnetX Holding Corporation 2013 Equity Incentive Plan (the “2013 Plan”), which has been approved by our

stockholders.

To the extent that any award should expire, become un-exercisable or is otherwise forfeited, the shares subject to such award will again become available for issuance under the 2013 Plan.

The 2013 Plan provides for the granting of

stock options and restricted stock units purchase rights (“RSUs”) to our employees and consultants.

Stock options granted under the 2013 Plan may be incentive stock options or nonqualified stock options.

Incentive stock options (“ISOs”) may only be

granted to our employees (including officers and directors).

Nonqualified stock options (“NSOs”) and stock purchase rights may be granted to our employees and consultants.

The 2013 Plan expires in 2023.

In April 2021, our Board of Directors

approved an amendment and restatement of the 2013 Plan to, among other things, increase the shares reserved under the Plan by 2,500,000 shares (the “Plan Amendment”).

Our stockholders approved the Plan Amendment at the 2021 Annual Meeting of the

Stockholders held on June 3, 2021.

As of December 31, 2021, there were 2,240,296 shares available to be granted under the Plan.

We had 5,812,521 and 5,630,021 options outstanding at December 31, 2020 and December 31, 2019, respectively, with an average exercise price of $8.55 and $8.49, respectively.

We had 504,323 and 498,489 restricted stock units outstanding at December 31, 2020 and December 31, 2019, respectively, with a weighted average grant price of $5.69 and $4.71, respectively.

We had 6,397,437 and 5,812,521 options outstanding as of December 31,

2021 and December 31, 2020, respectively, with an average exercise price of $6.99 and $8.55, respectively.

We had 509,155 and 504,323 RSUs outstanding as of December 31, 2021 and December 31, 2020, respectively, with a weighted average grant price

of $5.38 and $5.69, respectively.

Plan Category

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Equity compensation plans not approved by security holders

On March 19, 2020, the Compensation Committee granted 240,000 options to the employees of VirnetX, Inc.

On April 2, 2020, the Compensation Committee granted 50,000 options to an employee of VirnetX Inc.

On May 29, 2020, the Compensation Committee granted 37,500 options and 24,999 RSUs to members of the Board of Directors of VirnetX, Inc.

On June 3, 2020, the Compensation Committee granted 290,000 options and 193,330 RSUs to the employees of VirnetX, Inc On December 18, 2020, the Compensation Committee granted 120,000 options to an employee of VirnetX Inc.

and 10,000 options to a consultant.

On June 3, 2021, the Compensation Committee of our Board of Directors (the “Compensation Committee”) granted 37,500 stock options and 24,999 RSUs to members of our

Board of Directors.

On June 14, 2021, the Compensation Committee granted 742,000 stock options and 211,662 RSUs to our employees.

On August 2, 2021, the Compensation Committee granted 50,000 stock options to an employee.

On September 1, 2021, the

Compensation Committee granted 120,000 options to an employee.

On December 13, 2021, the Compensation Committee granted 50,000 options to an employee.

Certain Relationships and Related Transactions, and Director Independence

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Financial Statement Schedule:

Financial statement schedules are omitted because they are not applicable, or the required information is shown in the financial statements or notes thereto.

All other schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or the notes thereto.

The documents listed in the Exhibit Index of this Annual Report on Form 10-K are incorporated by reference or are filed with this Annual Report on Form 10-K, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).

Financial statement schedules are omitted because they are not applicable, or the required information is

shown in the financial statements or notes thereto.

All other schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or the notes

The documents listed in the Exhibit Index of this Annual Report on Form 10-K are incorporated by reference or are filed with

this Annual Report on Form 10-K, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).

EXHIBIT INDEX

1 unchanged sentence

Certificate of Incorporation of the Company.

By Laws of the Company.

Form of Warrant Agency Agreement by and between the Company and Corporate Stock Transfer, Inc.

the Company .

Warrant Agency Agreement by and between the Company and Corporate Stock Transfer, Inc.

as Warrant Agent .

Form of Series I Warrant.

Specimen Common Stock Certificate.

Form of Senior Indenture

Form of Subordinated Indenture

Description of Capital Stock

Form of Indemnification Agreement by and between the Company and each of Kendall Larsen, Robert D.

Short III, Gary Feiner, Michael F.

Angelo, Thomas M.

O’Brien and Richard Nance.

2007 Stock Plan, as amended on April 13, 2012.

Amended Form of Stock Option Agreement – 2007 Stock Plan.

Form of Restricted Stock Unit Award Agreement – 2007 Stock Plan.

2013 Equity Incentive Plan.

Form of Stock Option Agreement – 2013 Equity Incentive Plan.

Form of Restricted Stock Unit Agreement – 2013 Equity Incentive Plan.

Voting Agreement among the Company and certain of its stockholders, dated as of December 12, 2007.

Securities Purchase Agreement, dated as of September 2, 2009, by and between the Company and the Purchasers (as defined therein).

Incorporated by reference herein

Form of Registration Rights Agreement by and between the Company and the Purchasers (as defined therein).

Form of Underwriting Agreement between VirnetX Holding Corporation and Gilford Securities Incorporated.

Patent License and Assignment Agreement by and between the Company and Leidos, Inc.

of Series I Warrant .

Specimen Common

Stock Certificate .

Form of Senior

Subordinated Indenture .

of Capital Stock .

of Indemnification Agreement .

2007 Stock Plan, as amended.

Amended Form of

Stock Option Agreement – 2007 Stock Plan .

Restricted Stock Unit Award Agreement – 2007 Stock Plan .

Equity Incentive Plan, as amended .

Form of Stock

Option Agreement – 2013 Equity Incentive Plan .

Restricted Stock Unit Agreement – 2013 Equity Incentive Plan .

Agreement among the Company and certain of its stockholders, dated as of December 12, 2007 .

Purchase Agreement, dated as of September 2, 2009, by and between the Company and the Purchasers (as defined therein) .

of Registration Rights Agreement by and between the Company and the Purchasers (as defined therein) .

Underwriting Agreement between VirnetX Holding Corporation and Gilford Securities Incorporated .

Patent License

and Assignment Agreement by and between the Company and Leidos, Inc.

(formerly Science Applications International Corporation) dated as of August 12, 2005 .

2 unchanged sentences

dated as of November 2, 2006 .

Amendment No.

2 to Patent License and Assignment Agreement by and between VirnetX, Inc.

1 unchanged sentence

dated as of March 12, 2008 .

Security Agreement by and between the Company and Leidos, Inc.

Agreement by and between the Company and Leidos, Inc.

dated as of August 12, 2005 .

Assignment Agreement between the Company and Leidos, Inc.

Agreement between the Company and Leidos, Inc.

dated as of December 21, 2006 .

Professional Services Agreement by and between the Company and Leidos, Inc.

Services Agreement by and between the Company and Leidos, Inc.

dated as of August 12, 2005 .

Engagement Letter dated June 8, 2009, by and between McKool Smith, a professional corporation, and VirnetX, Inc.

Engagement Letter dated April 15, 2010, by and between McKool Smith, a professional corporation, and VirnetX, Inc.

Settlement and License Agreement, by and between Microsoft Corporation and VirnetX, Inc., dated May 14, 2010.

Amended Settlement and License Agreement, by and between Microsoft Corporation and VirnetX, Inc., dated December 17, 2014.

Employment Offer Letter from VirnetX, Inc.

to Richard H.

Amended and Restated Revenue Sharing Agreement by and between VirnetX Holding Corporation and Public Intelligence Technology Associates, dated October 18, 2017.

Incorporated by reference herein

Amended and Restated Gabriel License Agreement by and between VirnetX Holding Corporation and Public Intelligence Technology Associates, dated October 18, 2017.

Sales Agreement, dated August 31, 2018, by and between VirnetX Holding Corporation and Cowen and Company, LLC.

Subsidiaries of VirnetX Holding Corporation.

Settlement and

License Agreement, by and between Microsoft Corporation and VirnetX, Inc., dated May 14, 2010 .

Settlement and License Agreement, by and between Microsoft Corporation and VirnetX, Inc., dated December 17, 2014 .

Restated Revenue Sharing Agreement by and between VirnetX Holding Corporation and Public Intelligence Technology Associates, dated October 18, 2017 .

Restated Gabriel License Agreement by and between VirnetX Holding Corporation and Public Intelligence Technology Associates, dated October 18, 2017 .

Agreement, dated August 31, 2018, by and between VirnetX Holding Corporation and Cowen and Company, LLC .

Hire Letter by and between Katherine

Allanson and the Company, dated as of September 1, 2021.

Consent of Farber Hass Hurley LLP, Independent Registered Public Accounting Firm.

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XBRL Taxonomy Extension Presentation Linkbase Document

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

Indicates management contract or compensatory plan.

Confidential treatment has been granted by the Securities and Exchange Commission as to certain portions of this Exhibit.

Portions of this Exhibit have been omitted pending a determination by the Securities and Exchange Commission as to whether these portions should be granted confidential treatment.

The certifications attached as Exhibit 32.1 and 32.2 that accompany this Annual Report on Form 10-K are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of VirnetX Holding Corporation under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

Confidential treatment has been granted by the SEC as to certain portions of this exhibit.

Portions of this exhibit have been omitted pending a determination by the SEC as to whether these portions should be granted confidential treatment.

The certifications attached as Exhibit 32.1 and 32.2 that accompany this Report are not deemed filed with the Securities and Exchange Commission and are not to be incorporated

by reference into any filing of VirnetX Holding Corporation under the Securities Act or the Exchange Act, whether before or after the date of this Report, irrespective of any general incorporation language contained in such filing.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be

signed on its behalf by the undersigned, thereunto duly authorized.

VirnetX Holding Corporation

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POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Kendall Larsen his or her attorney-in-fact, with full power of substitution, for him or her in any and all capacities, to sign any amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his or her substitute or substitutes may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities indicated.

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Kendall Larsen as his attorney-in-fact, with full power

of substitution, for him in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission,

hereby ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of

the registrant and in the capacities indicated.

/s/ Kendall Larsen

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( Principal Executive Officer )

/s/ Richard H.

/s/ Katherine Allanson

Chief Financial Officer

March 16, 2022

Katherine Allanson

( Principal Financial Officer and

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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-K

Item 9A. Controls and Procedures