VirnetX Holding (VHC) 10-Q 9 Nov 16 2016 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Nov. 04, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	VirnetX Holding Corp
Entity Central Index Key	1,082,324
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		56,689,167
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2016

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 8,527	$ 8,726
Investments available for sale	9,243	9,954
Prepaid expenses and other current assets	706	685
Total current assets	18,476	19,365
Prepaid expenses, non-current	2,470	2,759
Property and equipment, net	40	48
Total assets	20,986	22,172
Current liabilities:
Accounts payable and accrued liabilities	2,832	2,283
Accrued payroll and related expenses	0	1,383
Royalty payable	884	0
Related-party payable	94	11
Income tax liability	400	400
Deferred revenue, current portion	1,500	1,500
Total current liabilities	5,710	5,577
Deferred revenue, non-current portion	2,875	1,500
Commitments and contingencies (Note 4)
Stockholders' equity:
Preferred stock, par value $0.0001 per share Authorized: 10,000,000 shares at September 30, 2016 and December 31, 2015, Issued and outstanding: 0 shares at September 30, 2016 and December 31, 2015	0	0
Common stock, par value $0.0001 per share Authorized: 100,000,000 shares at September 30, 2016 and December 31, 2015, Issued and outstanding: 56,689,167 shares and 53,198,835 shares, at September 30, 2016 and December 31, 2015, respectively	6	5
Additional paid-in capital	163,402	144,778
Accumulated deficit	(151,004)	(129,669)
Accumulated other comprehensive loss	(3)	(19)
Total stockholders' equity	12,401	15,095
Total liabilities and stockholders' equity	$ 20,986	$ 22,172

CONDENSED CONSOLIDATED BALANCE3

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2016	Dec. 31, 2015
Stockholders' equity:
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	56,689,167	53,198,835
Common stock, shares outstanding (in shares)	56,689,167	53,198,835

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) [Abstract]
Revenue	$ 375	$ 375	$ 1,148	$ 1,150
Operating expense:
Royalty expense	884	1,029	884	5,264
Research and development	460	463	1,391	1,272
Selling, general and administrative expenses	6,318	4,985	20,132	16,043
Total operating expense	7,662	6,477	22,407	22,579
Loss from operations	(7,287)	(6,102)	(21,259)	(21,429)
Loss on change in value of derivative liability	0	0	0	(117)
Interest and other income, net	19	12	50	57
Loss before taxes	(7,268)	(6,090)	(21,209)	(21,489)
Income tax expense	(119)	(7)	(126)	(9)
Net loss	$ (7,387)	$ (6,097)	$ (21,335)	$ (21,498)
Basic and diluted loss per share (in dollars per share)	$ (0.13)	$ (0.12)	$ (0.38)	$ (0.41)
Weighted average shares outstanding basic and diluted (in shares)	56,651	52,339	55,503	52,174

CONDENSED CONSOLIDATED STATEME5

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) [Abstract]
Net loss	$ (7,387)	$ (6,097)	$ (21,335)	$ (21,498)
Other comprehensive gain (loss), net of tax:
Change in equity adjustment from foreign currency translation, net of tax	0	2	4	(1)
Change in unrealized gain (loss) on investments, net of tax	(1)	(1)	12	6
Total other comprehensive income gain (loss)	(1)	1	16	5
Comprehensive loss	$ (7,388)	$ (6,096)	$ (21,319)	$ (21,493)

CONDENSED CONSOLIDATED STATEME6

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Cash flows from operating activities:
Net loss	$ (21,335)	$ (21,498)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	22	19
Amortization of warrant issuance costs	30	61
Stock-based compensation	3,979	5,326
Change in value of derivative liability	0	117
Changes in assets and liabilities:
Prepaid expenses and other assets	238	182
Accounts payable and accrued liabilities	549	(2,176)
Accrued payroll and related expenses	(1,383)	0
Royalty payable	884	(5,071)
Related party payable	83	(81)
Income tax liability	0	(8)
Deferred revenue	1,375	1,375
Net cash used in operating activities	(15,558)	(21,754)
Cash flows from investing activities:
Purchase of property and equipment	(14)	(4)
Purchase of investments	(7,888)	(6,234)
Proceeds from sale or maturity of investments	8,615	18,009
Net cash provided by investing activities	713	11,771
Cash flows from financing activities:
Proceeds from exercise of options	20	165
Proceeds from exercise of warrants	0	431
Proceeds from sale of common stock	14,626	719
Net cash provided by financing activities	14,646	1,315
Net decrease in cash and cash equivalents	(199)	(8,668)
Cash and cash equivalents, beginning of period	8,726	18,658
Cash and cash equivalents, end of period	8,527	9,990
Cash paid for income taxes	126	6
Non-cash transactions
Fair value of warrants issued for services	$ 0	$ 121

Business Description and Basis

Business Description and Basis of Presentation	9 Months Ended
	Sep. 30, 2016
Business Description and Basis of Presentation [Abstract]
Business Description and Basis of Presentation	Note 1 — Business Description and Basis of Presentation VirnetX Holding Corporation, which we refer to as “we”, “us”, “our”, “the Company” or “VirnetX”, is engaged in the business of commercializing a portfolio of patents. We seek to license our technology, including GABRIEL Connection Technology™, to various original equipment manufacturers, or OEMs, that use our technologies in the development and manufacturing of their own products within the IP-telephony, mobility, fixed-mobile convergence and unified communications markets. Prior to 2012, our revenue was limited to an insignificant amount of software royalties pursuant to the terms of a single license agreement. Since 2012 we had revenues from settlements of patent infringement disputes whereby we received consideration for past sales of licensees that utilized our technology, where there was no prior patent license agreement, as well as license agreement revenues from settlements providing licensing for the continued use of our technology (see “Revenue Recognition”). Our portfolio of intellectual property is the foundation of our business model. We currently own approximately 49 U.S. and 69 foreign patents with approximately 50 pending patent applications worldwide. Our patent portfolio is primarily focused on securing real-time communications over the Internet, as well as related services such as the establishment and maintenance of a secure domain name registry. Our patented methods also have additional applications in the key areas of device operating systems and network security for Cloud services, M2M communications in areas of Smart City, Connected Car and Connected Home. All our U.S. and foreign patents and pending patent applications relate generally to securing communications over the internet and as such, cover all our technology and other products. Our issued U.S. and foreign patents expire at various times during the period from 2019 to 2024. Some of our issued patents and pending patent applications were acquired by our principal operating subsidiary, VirnetX, Inc., from Leidos, (f/k/a Science Applications International Corporation or SAIC) in 2006 and we are required to make payments to Leidos, in certain cases that result in cash or certain other values generated from those patents. The amount of such payments depends upon the type of value generated, and certain categories are subject to maximums and other limitations.

Summary of Significant Accounti

Summary of Significant Accounting Policies	9 Months Ended
	Sep. 30, 2016
Summary of Significant Accounting Policies [Abstract]
Summary of Significant Accounting Policies	Note 2 — Summary of Significant Accounting Policies Unaudited Interim Financial Information The accompanying Condensed Consolidated Balance Sheet as of September 30, 2016, the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015, the Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2016 and 2015, and the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015 are unaudited. These unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). In our opinion, the unaudited interim consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair presentation of our financial position as of September 30, 2016, our results of operations for the three and nine months ended September 30, 2016 and 2015, and our cash flows for the nine months ended September 30, 2016 and 2015. The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016. These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed with the SEC on March 15, 2016. Use of Estimates We prepare our consolidated financial statements in accordance with U.S. GAAP. In doing so, we make estimates and assumptions that affect our reported amounts of assets, liabilities, revenues, and expenses, as well as related disclosure of contingent assets and liabilities. In some cases, we could reasonably have used different accounting policies and estimates. In some cases, changes in our accounting estimates are reasonably likely to occur. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, at the time they are made and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting policies and estimates, which we discuss further below. Basis of Consolidation The consolidated financial statements include the accounts of VirnetX Holding Corporation and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated. Revenue Recognition We derive our revenue from patent licensing. The timing and amount of revenue recognized from each licensee depends upon a variety of factors, including the specific terms of each agreement and the nature of the deliverables and obligations. Such agreements may be complex and include multiple elements. These agreements may include, without limitation, elements related to the settlement of past patent infringement liabilities, up-front and non-refundable license fees for the use of patents, patent licensing royalties on covered products sold by licensees, and the compensation structure and ownership of intellectual property rights associated with contractual technology development arrangements. Licensing agreements are accounted for under the Financial Accounting Standards Board (“FASB”) revenue recognition guidance, “Revenue Arrangements with Multiple Deliverables.” This guidance requires consideration to be allocated to each element of an agreement that has stand-alone value using the relative fair value method. In other circumstances, such as those agreements involving consideration for past and expected future patent royalty obligations, after consideration of the particular facts and circumstances, the appropriate recording of revenue between periods may require the use of judgment. In all cases, revenue is only recognized after all the following criteria are met: (1) written agreements have been executed; (2) delivery of technology or intellectual property rights has occurred or services have been rendered; (3) fees are fixed or determinable; and (4) collectability of fees is reasonably assured. Patent License Agreements • Consideration for Past Sales • Current Royalty Payments • Non-Refundable Up-Front Fees and Minimum Fee Contracts • Non-Royalty Elements Deferred revenue In August 2013 we began receiving annual payments on a contract that requires payment to us over 4 years totaling $10,000 (“August 2013 Contract Settlement”). As of September 30, 2016, we received cash totaling $10,000, all of which is non-refundable. We recognized $375 and $1,125 of revenue related to the August 2013 Contract Settlement during the three and nine months ended September 30, 2016 and 2015 respectively. Activity under the August 2013 Contract Settlement was as follows: Deferred Revenue, December 31, 2015 $ 3,000 Payment received 2,500 Less: Amount amortized as revenue (1,125 ) Deferred Revenue, September 30, 2016 $ 4,375 Earnings Per Share Basic earnings per share are computed by dividing earnings available to common stockholders by the weighted average number of outstanding common shares during the period. Diluted earnings per share are computed by dividing net income by the weighted average number of shares outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Concentration of Credit Risk and Other Risks and Uncertainties Our cash and cash equivalents are primarily maintained at two major financial institutions in the United States. A portion of those balances are insured by the Federal Deposit Insurance Corporation. During the nine months ended September 30, 2016 we had funds which were uninsured. We do not believe that we are subject to any unusual financial risk beyond the normal risk associated with commercial banking relationships with major financial institutions. We have not experienced any losses on our deposits of cash and cash equivalents. Derivative Instruments Our Series I Warrants were required to be accounted for as derivative liabilities and carried at fair value on our Condensed Consolidated Balance Sheets because of an anti-dilution provision which precluded them from being considered indexed to our stock. The warrant liabilities were marked-to-market each period and the change in the fair value was recorded as gain or loss on derivative liability in the accompanying Condensed Consolidated Statements of Operations. All remaining unexercised Series I Warrants expired during the three months ended March 31, 2015. Prepaid Expenses Prepaid expenses at September 30, 2016 include the current portion of prepaid rent for a facility lease for corporate promotional and marketing purposes. From inception, the prepayment totaling $4,000 is being amortized over the 10-year term of the lease. The unamortized non-current portion of the prepayment is included in Prepaid expenses-non-current on the condensed consolidated balance sheet. Impairment of Long-Lived Assets On an annual basis we identify and record impairment losses on long-lived assets when events and changes in circumstances indicate that the carrying amount of an asset might not be recoverable. Recoverability is measured by comparison of the anticipated future net undiscounted cash flows to the related assets’ carrying value. If such assets are considered impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows arising from the asset. Fair Value of Financial Instruments Fair value is the price that would result from an orderly transaction between market participants at the measurement date. A fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). Level 2 measurements utilize either directly or indirectly observable inputs in markets other than quoted prices in active markets. Our financial instruments are stated at amounts that equal, or approximate, fair value. When we estimate fair value, we utilize market data or assumptions that we believe market participants would use in pricing the financial instrument, including assumptions about risk and inputs to the valuation technique. We use valuation techniques, primarily the income and market approach, which maximizes the use of observable inputs and minimize the use of unobservable inputs for recurring fair value measurements. Mutual Funds: U.S. Government and U.S. Agency Securities The following tables show the adjusted cost, gross unrealized gains, gross unrealized losses and fair value of our securities by significant investment category as of September 30, 2016 and December 31, 2015. September 30, 2016 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Investments Available for Sale Cash $ 5,335 $ — $ — $ 5,335 $ 5,335 $ — Level 1: Mutual funds 3,192 — — 3,192 3,192 — U.S. government securities 1,803 2 — 1,805 — 1,805 U.S. agency securities 7,433 5 — 7,438 — 7,438 12,428 7 — 12,435 3,192 9,243 Total $ 17,763 $ 7 $ — $ 17,770 $ 8,527 $ 9,243 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 New Accounting Pronouncements In August 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This update addresses a diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. This ASU covers the following eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (COLIs) (including bank-owned life insurance policies (BOLIs)); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We are currently evaluating the impact this guidance will have on our financial position and statement of operations. In June 2016, the FASB issued ASU No. 2016-13. The purpose of this ASU is to require a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. Credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses. This ASU is effective for interim and annual reporting periods beginning after December 15, 2019. We are currently evaluating the impact this guidance will have on our financial position and statement of operations. In May 2016, the FASB issued ASU No. 2016-12 which amended the revenue recognition guidance regarding collectability, noncash consideration, presentation of sales tax and transition. This ASU is effective for reporting periods beginning after December 15, 2017. We are currently evaluating the impact this guidance will have on our financial position and statement of operations. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606), which amends certain aspects of the FASB's new revenue standard, ASU No. 2014-09, Revenue from Contracts with Customers. The standard should be adopted concurrently with adoption of ASU 2014-09 which is effective for annual and interim periods beginning after December 15, 2017. We have not yet selected a transition method nor have we determined the effect of the standard on our financial position and statement of operations. In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718) (“ASU 2016-09”), which simplified certain aspects of the accounting for share-based payment transactions, including income taxes, classification of awards and classification in the statement of cash flows. ASU 2016-09 will be effective for the Company beginning in its first quarter of 2018. We are currently evaluating the impact of adopting the new stock compensation standard on our consolidated financial statements. In February 2016, FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. We are evaluating the impact this guidance will have on our financial position and statement of operations. In November 2015, the FASB issued “ Accounting Standards Update No. 2015-17—Income Taxes (Topic 740)”. In August 2014, the FASB issued Accounting Standards Update No. 2014-15, “ Presentation of Financial Statements – Going Concern” Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” substantial doubt, In May 2014, the FASB issued ASU No. 2014-09 “ Revenue from Contracts with Customers “Revenue Recognition” “Other Assets and Deferred Costs—Contracts with Customers”.

Income Taxes

Income Taxes	9 Months Ended
	Sep. 30, 2016
Income Taxes [Abstract]
Income Taxes	Note 3 - Income Taxes We had $119 and $126 of income tax expense for the three and nine months ended September 30, 2016 as a result of minimum tax payments and a change related to 2010 state taxes. During the three and nine month periods ended September 30, 2016, we had net operating losses (“NOLs”) which generated deferred tax assets for NOL carryforwards. We have provided valuation allowances against the net deferred tax assets including the deferred tax assets for NOL carryforwards. Valuation allowances provided for our net deferred tax assets increased by $2,707 and $7,942 for the three and nine months ended September 30, 2016, respectively. We had $7 income tax expense for the three months ended September 30, 2015, because of an adjustment related to a prior year tax return. Our income tax expense was $9 for the nine months ended September 30, 2015, which included the $7 adjustment noted above and a $2 expense related to minimum tax payments. During the three and nine month periods ended September 30, 2015, we had NOLs which generated deferred tax assets for NOL carry-forwards. We provided valuation allowances against the net deferred tax assets including the deferred tax assets for NOL carry-forwards. Valuation allowances provided for our net deferred tax assets increased by approximately $1,951 and $7,520 for the three and nine months ended September 30, 2015, respectively. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of deferred assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Based on the available objective evidence, including our history of operating losses and the uncertainty of generating future taxable income, management believes it is more likely than not that the net deferred tax assets at September 30, 2016 will not be fully realizable. Accordingly, management has maintained a valuation allowance against our net deferred tax assets at September 30, 2016. The valuation allowance provided against our net deferred tax assets was approximately $38,000 and $30,000 at September 30, 2016 and December 31, 2015, respectively. At September 30, 2016, we have federal and state NOL carry-forwards of approximately $69,000 and $37,000, respectively, expiring beginning in 2027 and 2016, respectively. We have adopted accounting guidance for income taxes, which clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements and prescribes a recognition threshold and measurement attribute for the financial statements recognition and measurement of a tax position taken or expected to be taken in a tax return. We are required to recognize in the financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. Our tax years for 2005 and forward are subject to examination by the U.S. tax authority and various state tax authorities. These years are open due to net operating losses and tax credits remaining unutilized from such years. Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of September 30, 2016, we had accrued immaterial amounts of interest and penalties related to uncertain tax positions.

Commitments and Related Party T

Commitments and Related Party Transactions	9 Months Ended
	Sep. 30, 2016
Commitments and Related Party Transactions [Abstract]
Commitments and Related Party Transactions	Note 4 — Commitments and Related Party Transactions We lease our offices under an operating lease with a third party expiring in October 2017. We recognize rent expense on a straight-line basis over the term of the lease. We lease the use of an aircraft from K2 Investment Fund LLC (“LLC”) for business travel for employees of the Company. We incurred approximately $228 and $596 compared to $88 and $391 in rental fees and reimbursements to the LLC during the three and nine months ended September 30, 2016 and 2015, respectively. Our Chief Executive Officer and Chief Administrative Officer are the managing partners and control the equity interests of the LLC. The lease term ends January 2017, and provides for non-exclusive use of the plane at a rate of $8 per flight hour, and requires no minimum usage. The agreement contains other terms and conditions normal in such transactions and can be cancelled by either us or the LLC with 30 days’ notice. The lease renews on an annual basis unless terminated by the Lessor or Lessee.

Stock-Based Compensation

Stock-Based Compensation	9 Months Ended
	Sep. 30, 2016
Stock-Based Compensation [Abstract]
Stock-Based Compensation	Note 5 — Stock-Based Compensation We have a stock incentive plan for employees and others called the VirnetX Holding Corporation 2013 Equity Incentive Plan (the "Plan"), which has been approved by our stockholders. The Plan provides for grants of 14,124,469 shares of our common stock, including stock options and restricted stock units (“RSUs”), and will expire in 2023. As of September 30, 2016, 421,221 shares remained available for grant under the Plan. During the three months ended September 30, 2016 and 2015, we granted no options. During the nine months ended September 30, 2016, we granted options for a total of 429,000 shares. The weighted average fair values at the grant dates for options issued during the nine months ended September 30, 2016 was $3.25 per option. The fair values of options at the grant date were estimated utilizing the Black-Scholes valuation model with the following weighted average assumptions for the nine months ended September 30, 2016 (i) dividend yield on our common stock of 0 percent (ii) expected stock price volatility of 80 percent (iii) a risk-free interest rate of 1.84 percent and (iv) an expected option term of 6 years. During the nine months ended September 30, 2015, we granted options for a total of 294,000 shares with a weighted average grant date fair value of $4.19. The fair values of options at the grant date were estimated utilizing the Black-Scholes valuation model with the following weighted average assumptions for the nine months ended September 30, 2015 (i) dividend yield on our common stock of 0 percent (ii) expected stock price volatility of 86 percent (iii) a risk-free interest rate of 2.21 percent and (iv) an expected option term of 6 years. During the three months ended September 30, 2016 and 2015, we granted no RSUs. During the nine months ended September 30, 2016 and 2015, we granted 219,331 and 162,665 RSUs, respectively. The weighted average fair values at the grant dates for RSUs issued during the nine months ended September 30, 2016 and 2015 were $4.75 and $5.57 per RSU, respectively. RSUs, which are subject to forfeiture if service terminates prior to the shares vesting, are expensed ratably over the vesting period. Stock-based compensation expense included in general and administrative expense was $1,423 and $3,979 for the three and nine months ended September 30, 2016, respectively, and $1,889 and $5,326 for the three and nine months ended September 30, 2015, respectively. As of September 30, 2016, the unrecognized stock-based compensation expense related to non-vested stock options and RSUs was $4,890 and $2,796, respectively, which will be amortized over an estimated weighted average period of approximately 2.86 and 2.70 years, respectively. During the nine-month period ended September 30, 2016 we issued 135,102 new shares of common stock as a result of RSUs which vested and were paid out and issued 50,357 shares of common stock as a result of stock options that were exercised during the period.

Equity

Equity	9 Months Ended
	Sep. 30, 2016
Equity [Abstract]
Equity	Note 6 — Equity In August 2015, we filed a universal shelf registration statement with the SEC enabling us to offer and sell from time to time up to $100 million of equity, debt or other types of securities. We also entered into an at-the-market (“ATM”) equity offering sales agreement with Cowen & Company, LLC in August 2015, under which we may offer and sell shares of our common stock having an aggregate value of up to $35 million. We have and expect to use proceeds from this offering for GABRIEL product development and marketing, and general corporate purposes, which may include working capital, capital expenditures, other corporate expenses and acquisitions of complementary products, technologies or businesses. From August 2015 through September 30, 2016, we sold 4,139,929 shares under the ATM. The average sales price per common share was $4.46 and the aggregate proceeds from the sales totaled $18,456 during the period. Sales commissions, fees and other costs associated with the ATM totaled $554. During the three and nine months ended September 30, 2016, we sold 224,944 and 3,304,873 shares under the ATM, respectively. The average sales price per common share was $4.05 and $4.56 and the aggregate proceeds from the sales totaled $910 and $15,079 during the three and nine months ended September 30, 2016, respectively. Sales commissions, fees and other costs associated with the ATM totaled $27 and $452, respectively. Warrants During 2015 we issued warrants (“Advisor Warrants”) for the purchase of 25,000 shares of common stock for $7 per share, which expire in April 2020. The Advisor Warrants were issued for advisory services provided by a third party. Our Advisor Warrants were recorded at fair value on the issuance date and included in Additional Paid in Capital on our Condensed Consolidated Balance Sheet. The Advisor Warrants are exercisable by the holder, in whole or in part, until expiration, and may also be net-share-settled. Terms of the warrant agreement include no registration requirements for the underlying common stock and there are no anti-dilution provisions. The fair value at issuance of the warrants was recorded in Prepaid Expenses and Other Current Assets, and is being amortized over the twelve-month life of the service contract, with the expense included in Selling, General and Administrative Expense in our Condensed Consolidated Statements of Operations. The fair value of the Advisor Warrants at the issuance date of $121 was estimated utilizing the Black-Scholes valuation model with the following assumptions: (i) dividend yield on our common stock of 0 percent, (ii) expected stock price volatility of 87.5 percent, (iii) a risk-free interest rate of 1.33 percent, and (iv) an expected warrant term of 5 years. Information about warrants outstanding during the nine months ended September 30, 2016 follows: Original Number of Warrants Issued Exercise Price per Common Share Exercisable at December 31, 2015 Became Exercisable Exercised Terminated / Cancelled / Expired Exercisable at September 30, 2016 Expiration Date 25,000 $ 7.00 25,000 — — — 25,000 April 2020 25,000 — — — 25,000

Litigation

Litigation	9 Months Ended
	Sep. 30, 2016
Litigation [Abstract]
Litigation	Note 7 — Litigation We have five intellectual property infringement lawsuits pending in the United States District Court for the Eastern District of Texas, Tyler Division, and United States Court of Appeals for the Federal Circuit (“USCAFC”). VirnetX Inc. v. Apple, Inc. (Case 6:12-CV-00855-LED) On March 30, 2015, the United States Court for the Eastern District of Texas, Tyler Division, issued an order finding substantial overlap between the remanded portions of the Civil Action Case 6:10-CV-00417-LED (VirnetX vs. Cisco et. al.), and the ongoing Civil Action Case 6:12-CV-00855-LED (VirnetX Inc. v. Apple, Inc.). The court consolidated the two civil actions under Civil Action Case 6:12-CV-00855-LED (VirnetX Inc. v. Apple, Inc.) and designated it as the lead case. The jury trial in this case was held on January 25, 2016. On February 4, 2016, a jury in the United States Court for the Eastern District of Texas, Tyler Division, awarded us $625.6 million in a verdict against Apple Inc. for infringing four of our US patents, marking it the second time a federal jury has found Apple liable for infringing VirnetX’s patented technology. The verdict includes royalties awarded to us based on an earlier patent infringement finding (Case 6:10-CV-00417-LED) VirnetX Inc. v. Cisco Systems, Inc. et al. (Case 6:10-CV-00417-LED) (“Apple I”) On August 11, 2010, we initiated a lawsuit by filing a complaint against Aastra USA. Inc. (“Aastra”), Apple, Cisco Systems, Inc. (“Cisco”), and NEC Corporation (“NEC”) in the United States District Court for the Eastern District of Texas, Tyler Division, pursuant to which we alleged that these parties infringe on certain of our patents. We sought damages and injunctive relief. Aastra and NEC agreed to sign license agreements with us and we agreed to drop all the accusations of infringement against them. At the pre-trial hearing, the judge decided to conduct separate jury trial for each defendant, and try only the case against Apple on the scheduled trial date. The jury trial of our case against Cisco was held on March 4, 2013. The jury in our case against Cisco came back with a verdict of non-infringement also determined that all our patents-in-suit patents are not invalid. Our motions for a new trial and Cisco’s infringement of certain VirnetX patents were denied and the case against Cisco was closed. The jury trial of our case against Apple was held on October 31, 2012. On November 6, 2012, a jury in the United States Court for the Eastern District of Texas, Tyler Division, awarded us over $368 million in a verdict against Apple for infringing four of our patents. On February 26, 2013, the court issued its Memorandum Opinion and Order regarding post-trial motions resulting from the prior jury verdict denying Apple’s motion to reduce the damages awarded by the jury for past infringement. The Court further denied Apple’s request for a new trial on the liability and damages portions of the verdict and granted our motions for pre-judgment interest, post-judgment interest, and post-verdict damages to date. The Court ordered that Apple pay $34 in daily interest up to final judgment and $330 in daily damages for infringement up to final judgment for certain Apple devices included in the verdict. The Court denied our request for a permanent injunction and severed the future infringement portion into its own separate proceedings under Case 6:13-CV-00211-LED. On July 3, 2013, Apple filed an appeal of the judgment dated February 27, 2013 and order dated June 4, 2013 denying Apple’s motion to alter or amend the judgment to the USCAFC. On September 16, 2014, USCAFC issued their opinion, affirming the jury’s finding that all 4 of our patents are valid, confirming the jury’s finding of infringement of VPN on Demand under many of the asserted claims of our ‘135 and ‘151 patents, and confirming the district’s court’s decision to allow evidence concerning our licenses and royalty rates in connection with the determination of damages. In its opinion, the USCAFC also vacated the jury’s damages award and the district court’s claim construction with respect to parts of our ‘504 and ‘211 patents and remanded the damages award and determination of infringement with respect to FaceTime –for further proceedings consistent with its opinion. On October 16, 2014, we filed a petition with the USCAFC, requesting a rehearing and rehearing en banc of the Federal Circuit’s September 14, 2014, decision concerning VirnetX’s litigation against Apple Inc. On December 16, 2014, USCAFC denied our petition requesting a rehearing and rehearing en banc of the Federal Circuit’s September 14, 2014, decision and remanded the case back to the Eastern District of Texas, Tyler Division, for further proceedings consistent with its opinion. On February 25, 2015, USCAFC granted Apple’s motions to lift stay of proceedings and vacate Case 6:13-CV-00211-LED. On March 30, 2015, the court issued an order finding substantial overlap between the remanded portions of this case and the ongoing Civil Action Case 6:12-CV-00855-LED (VirnetX Inc. v. Apple, Inc.). The court consolidated the two civil actions under Civil Action Case 6:12-CV-00855-LED (VirnetX Inc. v. Apple, Inc.) and designated it as the lead case. On July 29, 2016, the court issued a new order, vacating its previous orders consolidating the cases Apple I case and Apple II case, ordering that the two cases be retried separately, and setting the retrial date for Apple I case with jury selection to begin on September 26, 2016. The court also ordered that the issue of willfulness in both cases is bifurcated and that the Apple II will be retried after Apple I case. The jury trial in this case was held on September 26, 2016. On September 30, 2016, a Jury in the United States Court for the Eastern District of Texas, Tyler Division, in the case VirnetX Inc., et al. v. Apple Inc., No. Apple I, has awarded VirnetX $302.4 million in a verdict against Apple Corporation for infringing four VirnetX patents, marking the third time a federal jury has found Apple liable for infringing VirnetX’s patented technology. The verdict includes royalties awarded to VirnetX, for unresolved issues in the Apple I case, remanded back from the USCAFC, related to (1) damages owed to VirnetX for infringement by Apple’s original VPN-on-Demand (VOD) and (2) the alleged infringement by Apple’s original FaceTime product, under the new claim construction of “secure communication link” pertaining to the ’504 and ’211 patents by the USCAFC, and the damages associated with that infringement. The court has scheduled a hearing on the issue of willfulness in this case on October 14, 2016. Both parties are in the process of briefing the court on their post-trial motions and pleading. VirnetX Inc. v. Apple, Inc. (Case 6:12-CV-00855-LED) (“Apple II”) On November 6, 2012, we filed a new complaint against Apple in the United States District Court for the Eastern District of Texas, Tyler Division for willfully infringing four of our patents, U.S. Patent Nos. 6,502,135, 7,418,504, 7,921,211 and 7,490,151, and seeking both an unspecified amount of damages and injunctive relief. The accused products include the iPhone 5, iPod Touch 5th Generation, iPad 4th Generation, iPad mini, and the latest Macintosh computers. Due to their release dates, these products were not included in the previous lawsuit that concluded with a Jury verdict on November 6, 2012 that was subsequently upheld by the United States District Court for the Eastern District of Texas, Tyler Division, on February 26, 2013. On July 1, 2013, we filed a consolidated and amended complaint to include U.S. Patent No. 8,051,181 and consolidate Civil Action No. 6:11-cv-00563-LED. On August 27, 2013, we filed an amended complaint including allegations of willful infringement related to U.S. Patent No. 8,504,697 seeking both damages and injunctive relief. The Markman hearing in this case was held on May 20, 2014 and on August 8, 2014, issued its Markman Order, denying Apple’s motion for summary judgment of indefiniteness, in which Apple alleged that some of the disputed claims terms in the patents asserted by us were invalid for indefiniteness. In a separate order, the court granted in part and denied in part our motion for partial summary judgment on Apple’s invalidity counterclaims, precluding Apple from asserting invalidity as a defense against infringement of the claims that were tried before a jury in our prior litigation against Apple (VirnetX vs. Cisco et. al., Case 6:10-CV-00417-LED). The jury trial in this case was scheduled for October 13, 2015. On March 30, 2015, the court issued an order finding substantial overlap between this case and the remanded portions of Case 6:10-CV-00417-LED (VirnetX vs. Cisco et. al.). The court consolidated the two civil actions under Civil Action Case 6:12-CV-00855-LED (VirnetX Inc. v. Apple, Inc.) and designated it as the lead case. On July 29, 2016, the court issued a new order, vacating its previous orders consolidating the cases Apple I case and Apple II case, ordering that the two cases be retried separately, and setting the retrial date for Apple I case with jury selection to begin on September 26, 2016. The court also ordered that the issue of willfulness in both cases is bifurcated and that the Apple II will be retried after Apple I case. We are awaiting court order setting the date for a new jury trial in Apple II case. VirnetX Inc. v. Apple, Inc. (Case 15-1934) On July 10, 2015, we filed appeals with the USCAFC, appealing the invalidity findings by the United States Patent and Trademark Office, Patent Trial and Appeal Board (“PTAB”) in IPR2014-00237 and IPR2014-00238, related to U.S. Patent Nos. 8,504,697. The oral arguments in this case are scheduled for November 7, 2016. VirnetX Inc. v. Apple, Inc. (Case 16-1211) On September 28, 2015, we filed appeals with the USCAFC, appealing the invalidity findings by the PTAB in IPR2014-00403 and IPR2014-00404 and on October 22, 2015 for IPR2014-00481 and IPR2014-00482 involving our U.S. Patent Nos. 7,188,180, and 7,987,274. The oral arguments in this case are scheduled for November 7, 2016. VirnetX Inc. v. Apple, Inc. (Case 16-1460) On November 30, 2015, we filed appeals with the USCAFC, appealing the invalidity findings by the PTAB in inter-partes , 2016. One or more potential intellectual property infringement claims may also be available to us against certain other companies who have the resources to defend against any such claims. Although we believe these potential claims are worth pursuing, commencing a lawsuit can be expensive and time-consuming, and there is no assurance that we will prevail on such potential claims. In addition, bringing a lawsuit may lead to potential counterclaims which may preclude our ability to commercialize our initial products, which are currently in development. Currently, we are not a party to any other pending legal proceedings, and are not aware of any proceeding threatened or contemplated against us by any governmental authority or other party.

Subsequent Events

Subsequent Events	9 Months Ended
	Sep. 30, 2016
Subsequent Events [Abstract]
Subsequent Events	Note 8 — Subsequent Events Subsequent to the period ended September 30, 2016, we sold 276,550 shares of common stock under the ATM. The average sales price per common share was $3.07 and the aggregate proceeds from the sales totaled $848 during the period. Sales commissions, fees and other costs associated with the ATM totaled $25.

Summary of Significant Accoun15

Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2016
Summary of Significant Accounting Policies [Abstract]
Unaudited Interim Financial Information	Unaudited Interim Financial Information The accompanying Condensed Consolidated Balance Sheet as of September 30, 2016, the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015, the Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2016 and 2015, and the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015 are unaudited. These unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). In our opinion, the unaudited interim consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair presentation of our financial position as of September 30, 2016, our results of operations for the three and nine months ended September 30, 2016 and 2015, and our cash flows for the nine months ended September 30, 2016 and 2015. The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016. These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed with the SEC on March 15, 2016.
Use of Estimates	Use of Estimates We prepare our consolidated financial statements in accordance with U.S. GAAP. In doing so, we make estimates and assumptions that affect our reported amounts of assets, liabilities, revenues, and expenses, as well as related disclosure of contingent assets and liabilities. In some cases, we could reasonably have used different accounting policies and estimates. In some cases, changes in our accounting estimates are reasonably likely to occur. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, at the time they are made and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting policies and estimates, which we discuss further below.
Basis of Consolidation	Basis of Consolidation The consolidated financial statements include the accounts of VirnetX Holding Corporation and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated.
Revenue Recognition	Revenue Recognition We derive our revenue from patent licensing. The timing and amount of revenue recognized from each licensee depends upon a variety of factors, including the specific terms of each agreement and the nature of the deliverables and obligations. Such agreements may be complex and include multiple elements. These agreements may include, without limitation, elements related to the settlement of past patent infringement liabilities, up-front and non-refundable license fees for the use of patents, patent licensing royalties on covered products sold by licensees, and the compensation structure and ownership of intellectual property rights associated with contractual technology development arrangements. Licensing agreements are accounted for under the Financial Accounting Standards Board (“FASB”) revenue recognition guidance, “Revenue Arrangements with Multiple Deliverables.” This guidance requires consideration to be allocated to each element of an agreement that has stand-alone value using the relative fair value method. In other circumstances, such as those agreements involving consideration for past and expected future patent royalty obligations, after consideration of the particular facts and circumstances, the appropriate recording of revenue between periods may require the use of judgment. In all cases, revenue is only recognized after all the following criteria are met: (1) written agreements have been executed; (2) delivery of technology or intellectual property rights has occurred or services have been rendered; (3) fees are fixed or determinable; and (4) collectability of fees is reasonably assured. Patent License Agreements • Consideration for Past Sales • Current Royalty Payments • Non-Refundable Up-Front Fees and Minimum Fee Contracts • Non-Royalty Elements
Deferred revenue	Deferred revenue In August 2013 we began receiving annual payments on a contract that requires payment to us over 4 years totaling $10,000 (“August 2013 Contract Settlement”). As of September 30, 2016, we received cash totaling $10,000, all of which is non-refundable. We recognized $375 and $1,125 of revenue related to the August 2013 Contract Settlement during the three and nine months ended September 30, 2016 and 2015 respectively. Activity under the August 2013 Contract Settlement was as follows: Deferred Revenue, December 31, 2015 $ 3,000 Payment received 2,500 Less: Amount amortized as revenue (1,125 ) Deferred Revenue, September 30, 2016 $ 4,375
Earnings Per Share	Earnings Per Share Basic earnings per share are computed by dividing earnings available to common stockholders by the weighted average number of outstanding common shares during the period. Diluted earnings per share are computed by dividing net income by the weighted average number of shares outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued.
Concentration of Credit Risk and Other Risks and Uncertainties	Concentration of Credit Risk and Other Risks and Uncertainties Our cash and cash equivalents are primarily maintained at two major financial institutions in the United States. A portion of those balances are insured by the Federal Deposit Insurance Corporation. During the nine months ended September 30, 2016 we had funds which were uninsured. We do not believe that we are subject to any unusual financial risk beyond the normal risk associated with commercial banking relationships with major financial institutions. We have not experienced any losses on our deposits of cash and cash equivalents.
Derivative Instruments	Derivative Instruments Our Series I Warrants were required to be accounted for as derivative liabilities and carried at fair value on our Condensed Consolidated Balance Sheets because of an anti-dilution provision which precluded them from being considered indexed to our stock. The warrant liabilities were marked-to-market each period and the change in the fair value was recorded as gain or loss on derivative liability in the accompanying Condensed Consolidated Statements of Operations. All remaining unexercised Series I Warrants expired during the three months ended March 31, 2015.
Prepaid Expenses	Prepaid Expenses Prepaid expenses at September 30, 2016 include the current portion of prepaid rent for a facility lease for corporate promotional and marketing purposes. From inception, the prepayment totaling $4,000 is being amortized over the 10-year term of the lease. The unamortized non-current portion of the prepayment is included in Prepaid expenses-non-current on the condensed consolidated balance sheet.
Impairment of Long-Lived Assets	Impairment of Long-Lived Assets On an annual basis we identify and record impairment losses on long-lived assets when events and changes in circumstances indicate that the carrying amount of an asset might not be recoverable. Recoverability is measured by comparison of the anticipated future net undiscounted cash flows to the related assets’ carrying value. If such assets are considered impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows arising from the asset.
Fair Value of Financial Instruments	Fair Value of Financial Instruments Fair value is the price that would result from an orderly transaction between market participants at the measurement date. A fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). Level 2 measurements utilize either directly or indirectly observable inputs in markets other than quoted prices in active markets. Our financial instruments are stated at amounts that equal, or approximate, fair value. When we estimate fair value, we utilize market data or assumptions that we believe market participants would use in pricing the financial instrument, including assumptions about risk and inputs to the valuation technique. We use valuation techniques, primarily the income and market approach, which maximizes the use of observable inputs and minimize the use of unobservable inputs for recurring fair value measurements. Mutual Funds: U.S. Government and U.S. Agency Securities The following tables show the adjusted cost, gross unrealized gains, gross unrealized losses and fair value of our securities by significant investment category as of September 30, 2016 and December 31, 2015. September 30, 2016 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Investments Available for Sale Cash $ 5,335 $ — $ — $ 5,335 $ 5,335 $ — Level 1: Mutual funds 3,192 — — 3,192 3,192 — U.S. government securities 1,803 2 — 1,805 — 1,805 U.S. agency securities 7,433 5 — 7,438 — 7,438 12,428 7 — 12,435 3,192 9,243 Total $ 17,763 $ 7 $ — $ 17,770 $ 8,527 $ 9,243 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
New Accounting Pronouncements	New Accounting Pronouncements In August 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This update addresses a diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. This ASU covers the following eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (COLIs) (including bank-owned life insurance policies (BOLIs)); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We are currently evaluating the impact this guidance will have on our financial position and statement of operations. In June 2016, the FASB issued ASU No. 2016-13. The purpose of this ASU is to require a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. Credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses. This ASU is effective for interim and annual reporting periods beginning after December 15, 2019. We are currently evaluating the impact this guidance will have on our financial position and statement of operations. In May 2016, the FASB issued ASU No. 2016-12 which amended the revenue recognition guidance regarding collectability, noncash consideration, presentation of sales tax and transition. This ASU is effective for reporting periods beginning after December 15, 2017. We are currently evaluating the impact this guidance will have on our financial position and statement of operations. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606), which amends certain aspects of the FASB's new revenue standard, ASU No. 2014-09, Revenue from Contracts with Customers. The standard should be adopted concurrently with adoption of ASU 2014-09 which is effective for annual and interim periods beginning after December 15, 2017. We have not yet selected a transition method nor have we determined the effect of the standard on our financial position and statement of operations. In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718) (“ASU 2016-09”), which simplified certain aspects of the accounting for share-based payment transactions, including income taxes, classification of awards and classification in the statement of cash flows. ASU 2016-09 will be effective for the Company beginning in its first quarter of 2018. We are currently evaluating the impact of adopting the new stock compensation standard on our consolidated financial statements. In February 2016, FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. We are evaluating the impact this guidance will have on our financial position and statement of operations. In November 2015, the FASB issued “ Accounting Standards Update No. 2015-17—Income Taxes (Topic 740)”. In August 2014, the FASB issued Accounting Standards Update No. 2014-15, “ Presentation of Financial Statements – Going Concern” Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” substantial doubt, In May 2014, the FASB issued ASU No. 2014-09 “ Revenue from Contracts with Customers “Revenue Recognition” “Other Assets and Deferred Costs—Contracts with Customers”.

Summary of Significant Accoun16

Summary of Significant Accounting Policies (Tables)	9 Months Ended
	Sep. 30, 2016
Summary of Significant Accounting Policies [Abstract]
Schedule of Deferred Revenue	Activity under the August 2013 Contract Settlement was as follows: Deferred Revenue, December 31, 2015 $ 3,000 Payment received 2,500 Less: Amount amortized as revenue (1,125 ) Deferred Revenue, September 30, 2016 $ 4,375
Cash and Available-for-Sale Securities Adjusted Cost, Gross Unrealized Gains, Gross Unrealized Losses and Fair Value by Significant Investment Category	The following tables show the adjusted cost, gross unrealized gains, gross unrealized losses and fair value of our securities by significant investment category as of September 30, 2016 and December 31, 2015. September 30, 2016 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Investments Available for Sale Cash $ 5,335 $ — $ — $ 5,335 $ 5,335 $ — Level 1: Mutual funds 3,192 — — 3,192 3,192 — U.S. government securities 1,803 2 — 1,805 — 1,805 U.S. agency securities 7,433 5 — 7,438 — 7,438 12,428 7 — 12,435 3,192 9,243 Total $ 17,763 $ 7 $ — $ 17,770 $ 8,527 $ 9,243 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

Equity (Tables)

Equity (Tables)	9 Months Ended
	Sep. 30, 2016
Equity [Abstract]
Information about Warrants Outstanding	Information about warrants outstanding during the nine months ended September 30, 2016 follows: Original Number of Warrants Issued Exercise Price per Common Share Exercisable at December 31, 2015 Became Exercisable Exercised Terminated / Cancelled / Expired Exercisable at September 30, 2016 Expiration Date 25,000 $ 7.00 25,000 — — — 25,000 April 2020 25,000 — — — 25,000

Business Description and Basi18

Business Description and Basis of Presentation (Details)	Sep. 30, 2016Patent
Finite-Lived Intangible Assets [Line Items]
Number of pending patent applications	50
Patents [Member] | U.S. [Member]
Finite-Lived Intangible Assets [Line Items]
Number of patents owned	49
Patents [Member] | Foreign [Member]
Finite-Lived Intangible Assets [Line Items]
Number of patents owned	69

Summary of Significant Accoun19

Summary of Significant Accounting Policies (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016USD ($)	Sep. 30, 2015USD ($)	Sep. 30, 2016USD ($)Institution	Sep. 30, 2015USD ($)	Dec. 31, 2015USD ($)	Dec. 31, 2014USD ($)
Patent License Agreements [Abstract]
Minimum period after delivery in which fees are generally presumed not to be fixed or determinable, and revenue is deferred and recognized as earned			12 months
Concentration of Credit Risk and Others Risks and Uncertainties [Abstract]
Number of financial institutions holding company's cash | Institution			2
Prepaid Expenses [Abstract]
Prepayment of facility lease for corporate promotional and marketing purposes	$ 4,000		$ 4,000
Lease term			10 years
Cash and available-for-sale securities adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category [Abstract]
Adjusted Cost	8,527	$ 9,990	$ 8,527	$ 9,990	$ 8,726	$ 18,658
Adjusted Cost	12,428		12,428		15,390
Unrealized Gains	7		7		1
Unrealized Losses	0		0		(7)
Fair Value	12,435		12,435		15,384
Adjusted Cost	17,763		17,763		18,686
Fair Value	17,770		17,770		18,680
Investments Available for Sale	12,435		12,435		15,384
Cash [Member]
Cash and available-for-sale securities adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category [Abstract]
Adjusted Cost	5,335		5,335		3,296
Fair Value	5,335		5,335		3,296
Cash and Cash Equivalents	5,335		5,335		3,296
Mutual Funds [Member]
Cash and available-for-sale securities adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category [Abstract]
Adjusted Cost	3,192		3,192		5,005
Unrealized Gains	0		0		0
Unrealized Losses	0		0		0
Fair Value	3,192		3,192		5,005
Investments Available for Sale	3,192		3,192		5,005
U.S. Government Securities [Member]
Cash and available-for-sale securities adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category [Abstract]
Adjusted Cost	1,803		1,803		1,806
Unrealized Gains	2		2		0
Unrealized Losses	0		0		(3)
Fair Value	1,805		1,805		1,803
Investments Available for Sale	1,805		1,805		1,803
U.S. Agency Securities [Member]
Cash and available-for-sale securities adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category [Abstract]
Adjusted Cost	7,433		7,433		8,579
Unrealized Gains	5		5		1
Unrealized Losses	0		0		(4)
Fair Value	7,438		7,438		8,576
Investments Available for Sale	7,438		7,438		8,576
Recurring [Member]
Cash and available-for-sale securities adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category [Abstract]
Fair Value	8,527		8,527		8,726
Fair Value	9,243		9,243		9,954
Cash and Cash Equivalents	8,527		8,527		8,726
Investments Available for Sale	9,243		9,243		9,954
Recurring [Member] | Cash [Member]
Cash and available-for-sale securities adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category [Abstract]
Fair Value	5,335		5,335		3,296
Cash and Cash Equivalents	5,335		5,335		3,296
Recurring [Member] | Level 1 [Member]
Cash and available-for-sale securities adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category [Abstract]
Fair Value	3,192		3,192		5,430
Fair Value	9,243		9,243		9,954
Cash and Cash Equivalents	3,192		3,192		5,430
Investments Available for Sale	9,243		9,243		9,954
Recurring [Member] | Level 1 [Member] | Mutual Funds [Member]
Cash and available-for-sale securities adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category [Abstract]
Fair Value	3,192		3,192		5,005
Fair Value	0		0		0
Cash and Cash Equivalents	3,192		3,192		5,005
Investments Available for Sale	0		0		0
Recurring [Member] | Level 1 [Member] | U.S. Government Securities [Member]
Cash and available-for-sale securities adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category [Abstract]
Fair Value	0		0		0
Fair Value	1,805		1,805		1,803
Cash and Cash Equivalents	0		0		0
Investments Available for Sale	1,805		1,805		1,803
Recurring [Member] | Level 1 [Member] | U.S. Agency Securities [Member]
Cash and available-for-sale securities adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category [Abstract]
Fair Value	0		0		425
Fair Value	7,438		7,438		8,151
Cash and Cash Equivalents	0		0		425
Investments Available for Sale	7,438		$ 7,438		$ 8,151
August 2013 Contract [Member]
Deferred Revenue [Abstract]
Term of contract			4 years
Contract amount			$ 10,000
Activity under August 2013 contract settlement [Roll Forward]
Deferred Revenue, beginning balance			3,000
Payment received			2,500
Less: Amount amortized as revenue	(375)	$ (375)	(1,125)	$ (1,125)
Deferred Revenue, ending balance	$ 4,375		$ 4,375

Income Taxes (Details)

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Income Taxes [Abstract]
Income tax expense	$ 119	$ 7	$ 126	$ 9
Expense related to minimum tax payments				2
Net change in valuation allowance	2,707	$ 1,951	7,942	$ 7,520
Valuation allowance carried against net deferred tax assets	38,000		38,000		$ 30,000
Federal [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards	69,000		$ 69,000
Operating loss carryforwards, expiration dates			Dec. 31, 2027
State [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards	$ 37,000		$ 37,000
Operating loss carryforwards, expiration dates			Dec. 31, 2016

Commitments and Related Party21

Commitments and Related Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Offices [Member]
Operating Leased Assets [Line Items]
Lease expiration date			Oct. 31, 2017
K2 Investment Fund LLC [Member] | Aircraft [Member]
Operating Leased Assets [Line Items]
Lease expiration date			Jan. 31, 2017
Rental fees incurred for use of plane	$ 228	$ 88	$ 596	$ 391
Rate of aircraft lease (in dollars per flight hour)			$ 8
Term of notice for cancellation of lease			30 days

Stock-Based Compensation (Detai

Stock-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Fair value assumptions used in estimating fair value of warrants [Abstract]
Stock-based compensation expense			$ 3,979	$ 5,326
New issue of shares of common stock as a result of RSUs which vested (in shares)			135,102
Options exercised (in shares)			50,357
General and Administrative Expense [Member]
Fair value assumptions used in estimating fair value of warrants [Abstract]
Stock-based compensation expense	$ 1,423	$ 1,889	$ 3,979	$ 5,326
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted (in shares)	0	0	429,000	294,000
Options granted, weighted average grant date fair value (in dollars per share)			$ 3.25	$ 4.19
Fair value assumptions used in estimating fair value of warrants [Abstract]
Dividend yield			0.00%	0.00%
Expected stock price volatility			80.00%	86.00%
Risk-free interest rate			1.84%	2.21%
Expected term			6 years	6 years
Unrecognized stock-based compensation expense expected to be recognized	$ 4,890		$ 4,890
Weighted average amortization period			2 years 10 months 10 days
Restricted Stock Units (RSUs) [Member]
Fair value assumptions used in estimating fair value of warrants [Abstract]
RSUs granted (in shares)	0	0	219,331	162,665
Weighted average grant date fair value of RSU's granted (in dollars per share)	$ 4.75	$ 5.57	$ 4.75	$ 5.57
Unrecognized stock-based compensation expense expected to be recognized	$ 2,796		$ 2,796
Weighted average amortization period			2 years 8 months 12 days
2013 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized for issuance (in shares)	14,124,469		14,124,469
Shares available for grant (in shares)	421,221		421,221

Equity, Common Stock (Details)

Equity, Common Stock (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	9 Months Ended	14 Months Ended
	Sep. 30, 2016	Sep. 30, 2016	Sep. 30, 2016	Aug. 31, 2015
Universal Shelf Registration Statement [Member]
Common Stock [Abstract]
Securities offered for sale, aggregate value				$ 100,000
ATM Agreement [Member]
Common Stock [Abstract]
Securities offered for sale, aggregate value				$ 35,000
Average sales price per common share (in dollars per share)	$ 4.05	$ 4.56	$ 4.46
Aggregate proceeds from sales of common stock	$ 910	$ 15,079	$ 18,456
ATM Agreement [Member] | Common Stock [Member]
Common Stock [Abstract]
Number of shares of common stock sold (in shares)	224,944	3,304,873	4,139,929
Sales commissions, fees and other costs associated with issuance of common stock	$ 27	$ 452	$ 554

Equity, Warrants (Details)

Equity, Warrants (Details) - Warrants [Member] - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Information about warrants outstanding [Abstract]
Exercisable, beginning of period (in shares)	25,000
Became exercisable (in shares)	0
Exercised (in shares)	0
Terminated/cancelled/expired (in shares)	0
Exercisable, end of period (in shares)	25,000	25,000
Advisor Warrants [Member]
Warrants [Abstract]
Number of warrants issued (in shares)		25,000
Price of warrants issued (in dollars per share)		$ 7
Life of service contract	12 months
Fair value of warrants issued	$ 121
Fair value assumptions used in estimating fair value of warrants [Abstract]
Dividends yield of common stock	0.00%
Expected stock price volatility	87.50%
Risk-free interest rate	1.33%
Expected term	5 years
Information about warrants outstanding [Abstract]
Original number of warrants issued (in shares)	25,000
Exercise price per common share (in dollars per share)	$ 7
Exercisable, beginning of period (in shares)	25,000
Became exercisable (in shares)	0
Exercised (in shares)	0
Terminated/cancelled/expired (in shares)	0
Exercisable, end of period (in shares)	25,000	25,000
Expiration date	April 30, 2020

Litigation (Details)

Litigation (Details) - Positive Outcome of Litigation [Member] $ in Thousands	Feb. 04, 2016USD ($)Patent	Feb. 26, 2013USD ($)	Nov. 06, 2012USD ($)Patent	Sep. 30, 2016USD ($)PatentLawsuit
Gain Contingencies [Line Items]
Number of intellectual property infringement lawsuits pending | Lawsuit				5
Amount of damages awarded in patent infringement case	$ 625,600		$ 368,000	$ 302,400
Number of patents allegedly infringed upon by Apple, Inc. | Patent	4		4	4
Amount of interest payment awarded up to final judgment, per day		$ 34
Amount of damage infringement payment awarded up to final judgment, per day		$ 330

Subsequent Events (Details)

Subsequent Events (Details) - ATM Agreement [Member] - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended	9 Months Ended	14 Months Ended
	Nov. 09, 2016	Sep. 30, 2016	Sep. 30, 2016	Sep. 30, 2016
Subsequent Event [Line Items]
Aggregate proceeds from sales of common stock		$ 910	$ 15,079	$ 18,456
Common Stock [Member]
Subsequent Event [Line Items]
Number of shares of common stock sold (in shares)		224,944	3,304,873	4,139,929
Sales commissions, fees and other costs associated with issuance of common stock		$ 27	$ 452	$ 554
Subsequent Event [Member]
Subsequent Event [Line Items]
Aggregate proceeds from sales of common stock	$ 848
Sales commissions, fees and other costs associated with issuance of common stock	$ 25
Subsequent Event [Member] | Common Stock [Member]
Subsequent Event [Line Items]
Number of shares of common stock sold (in shares)	276,550
Average sales price per common share (in dollars per share)	$ 3.07