VirnetX Holding (VHC) 10-Q 9 Aug 18 2018 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Aug. 06, 2018
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	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		62,622,325
Document Fiscal Year Focus	2,018
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2018

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 3,968	$ 3,135
Accounts receivables	2	0
Investments available for sale	724	1,453
Prepaid expenses and other current assets	864	591
Total current assets	5,558	5,179
Prepaid expenses, non-current	1,796	1,989
Property and equipment, net	17	7
Total assets	7,371	7,175
Current liabilities:
Accounts payable and accrued liabilities	2,966	414
Accrued payroll and related expenses	219	2,175
Income tax liability	399	393
Deferred revenue, current portion	0	1,500
Total current liabilities	3,584	4,482
Deferred revenue, non-current portion	0	1,000
Other liabilities	140	140
Total liabilities	3,724	5,622
Commitments and contingencies (Note 4)
Stockholders' equity:
Preferred stock, par value $0.0001 per share Authorized: 10,000,000 shares at June 30, 2018 and December 31, 2017, Issued and outstanding: 0 shares at June 30, 2018 and December 31, 2017	0	0
Common stock, par value $0.0001 per share: Authorized: 100,000,000 shares at June 30, 2018 and December 31, 2017, Issued and outstanding: 62,292,808 shares and 59,051,978 shares, at June 30, 2018 and December 31, 2017, respectively	6	6
Additional paid-in capital	190,724	177,076
Accumulated deficit	(187,070)	(175,516)
Accumulated other comprehensive loss	(13)	(13)
Total stockholders' equity	3,647	1,553
Total liabilities and stockholders' equity	$ 7,371	$ 7,175

CONDENSED CONSOLIDATED BALANCE3

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Jun. 30, 2018	Dec. 31, 2017
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)	62,292,808	59,051,978
Common stock, shares outstanding (in shares)	62,292,808	59,051,978

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) [Abstract]
Revenue	$ 16	$ 396	$ 22	$ 771
Operating expense:
Research and development	1,186	957	2,191	1,873
Selling, general and administrative	5,292	3,250	11,901	6,615
Total operating expense	6,478	4,207	14,092	8,488
Loss from operations	(6,462)	(3,811)	(14,070)	(7,717)
Interest income, net	12	13	20	31
Loss before taxes	(6,450)	(3,798)	(14,050)	(7,686)
Provision for income tax	0	0	(5)	(5)
Net loss	$ (6,450)	$ (3,798)	$ (14,055)	$ (7,691)
Basic and diluted loss per share (in dollars per share)	$ (0.10)	$ (0.07)	$ (0.23)	$ (0.13)
Weighted average shares outstanding basic and diluted (in shares)	61,532	58,195	60,835	58,170

CONDENSED CONSOLIDATED STATEME5

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) [Abstract]
Net loss	$ (6,450)	$ (3,798)	$ (14,055)	$ (7,691)
Other comprehensive income (loss):
Change in equity adjustment from foreign currency translation, net of tax	0	0	0	(1)
Change in unrealized gain on investments, net of tax	(1)	0	0	(4)
Total other comprehensive income gain (loss)	(1)	0	0	(5)
Comprehensive loss	$ (6,451)	$ (3,798)	$ (14,055)	$ (7,696)

CONDENSED CONSOLIDATED STATEME6

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Cash flows from operating activities:
Net loss	$ (14,055)	$ (7,691)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	10	15
Stock-based compensation	2,008	1,715
Changes in assets and liabilities:
Prepaid expenses and other assets	(80)	(13)
Accounts payable and accrued liabilities	2,552	(1,362)
Accrued payroll and related expenses	(1,923)	(1,303)
Accounts receivables	(2)	0
Income tax liability	6	(1)
Deferred revenue	0	(750)
Net cash used in operating activities	(11,484)	(9,390)
Cash flows from investing activities:
Purchase of investments	(924)	(756)
Proceeds from sale or maturity of investments	1,635	5,760
Net cash provided by investing activities	711	5,004
Cash flows from financing activities:
Proceeds from sale of common stock	11,639	0
Payments of taxes on restricted stock units	(33)	(29)
Net cash provided by (used in) financing activities	11,606	(29)
Net change in cash and cash equivalents	833	(4,415)
Cash and cash equivalents, beginning of period	3,135	6,627
Cash and cash equivalents, end of period	3,968	2,212
ASU Topic 606 [Member]
Non-cash transactions
Deferred revenue reclassified to retained earnings - ASC 606 adoption	$ 2,500	$ 0

Business Description

Business Description	6 Months Ended
	Jun. 30, 2018
Business Description [Abstract]
Business Description	Note 1 — Business Description 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. 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 185 total patents and pending applications, including 70 U.S. patents/patent applications and 115 foreign patents/validations/pending applications. 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, Machine-to-Machine (“M2M”), communications in areas including “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, Inc. (“Leidos”) (f/k/a Science Applications International Corporation, or SAIC) in 2006 and we are required to make payments to Leidos based on cash or certain other values generated from those patents in certain circumstances. The amount of such payments depends upon the type of value generated and certain categories are subject to maximums and other limitations.

Basis of Presentation and Summa

Basis of Presentation and Summary of Significant Accounting Policies	6 Months Ended
	Jun. 30, 2018
Basis of Presentation and Summary of Significant Accounting Policies [Abstract]
Basis of Presentation and Summary of Significant Accounting Policies	Note 2 — Basis of Presentation and Summary of Significant Accounting Policies Unaudited Interim Financial Information The accompanying Condensed Consolidated Balance Sheet as of June 30, 2018, the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017, the Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2018 and 2017, and the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017 are unaudited. These unaudited interim condensed 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 condensed consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair presentation of our financial position as of June 30, 2018, our results of operations for the three and six months ended June 30, 2018 and 2017, and our cash flows for the six months ended June 30, 2018 and 2017. The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018. These unaudited interim condensed 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, 2017, filed with the SEC on March 16, 2018. Use of Estimates We prepare our condensed consolidated financial statements in accordance with U.S. GAAP. In doing so, we have to 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 condensed consolidated financial statements include the accounts of VirnetX Holding Corporation and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated. Reclassifications Certain prior period amounts were reclassified to conform to the current year’s presentation. None of these reclassifications had an impact on reported operating expenses, operating income or net income for any of the periods presented. Revenue Recognition Most of our revenue historically has been derived from licensing and royalty fees from contracts with customers which often spanned several years. We account for revenue in accordance with Accounting Standards Update (“ASU”) No.2014-09, Revenue from Contracts with Customers “Topic 606”, which we adopted on January 1, 2018 using the modified-retrospective method (see Note 8 – Effects of Adopting ASU Topic 606). Prior to January 1, 2018 we recognized revenue in accordance with previous guidance as described in our Annual Report on Form 10-K for the year ended December 31, 2017. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer in accordance with Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Our revenue arrangements may consist of multiple-element arrangements, with revenue for each unit of accounting recognized as the product or service is delivered to the customer. With the licensing of our patents, Certain contracts may require our customers to enter into a hosting arrangement with us and for these arrangements revenue is recognized over time, generally over the life of the servicing contract. Deferred revenue From 2013 to 2016, we received contractual payments totaling $10,000. In accordance with our revenue recognition policy, we deferred and then recognized revenue over the life of the contract, but not ahead of collection. We recognized $375 and $750 of revenue, related to this contract during the three and six months ended June 30, 2017. On January 1, 2018, we adopted Topic 606 and applied the modification retrospective approach as discussed above. 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 six months ended June 30, 2018 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. Prepaid Expenses Prepaid expenses at June 30, 2018 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 to be impaired, the impairment to be 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 June 30, 2018, and December 31, 2017. June 30, 2018 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Investments Available for Sale Cash $ 2,056 $ - $ - $ 2,056 $ 2,056 $ - Level 1: Mutual funds 1,087 - - 1,087 1,087 - U.S. government securities 80 - - 80 - 80 U.S. agency securities 1,468 1 - 1,469 825 644 2,635 1 - 2,636 1,912 724 Total $ 4,691 $ 1 $ - $ 4,692 $ 3,968 $ 724 December 31, 2017 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Investments Available for Sale Cash $ 1,972 $ — $ — $ 1,972 $ 1,972 $ — Level 1: Mutual funds 616 — — 616 616 U.S. agency securities 2,001 — (1 ) 2,000 547 1,453 2,617 — (1 ) 2,616 1,163 1,453 Total $ 4,589 $ — $ (1 ) $ 4,588 $ 3,135 $ 1,453 New Accounting Pronouncements In June 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-07, Compensation—Stock Compensation (“Topic 718”)—Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year and early adoption is permitted. We adopted the ASU effective June 30, 2018, which had no material impact on our financial position or statement of operations. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (“Topic 326”). 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 evaluating the impact this guidance will have on our financial position and statement of operations. In February 2016, FASB issued ASU No. 2016-02, Leases (“Topic 842”). Topic 842 requires an entity to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. For public companies, Topic 842 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early adoption permitted. We are evaluating the impact this guidance will have on our financial position and statement of operations. In May 2014, the FASB issued ASU No. 2014-09 Revenue from Contracts with Customers (“Topic 606”). As amended, Topic 606 supersedes prior revenue recognition requirements including most industry-specific revenue recognition guidance. In summary, the core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. On January 1, 2018 we adopted this standard which resulted in a $2,500 decrease in accumulated deficit and a $2,500 decrease in deferred revenue in our consolidated balance sheet (see Note 8 — Effects of Adopting ASU Topic 606).

Income Taxes

Income Taxes	6 Months Ended
	Jun. 30, 2018
Income Taxes [Abstract]
Income Taxes	Note 3 - Income Taxes We had income tax expense of $0 and $5 for the three and six-months ended June 30, 2018 and 2017, respectively, as a result of minimum tax payments. During the three and six-month period ended June 30, 2018 and 2017, we had net operating losses (“NOLs”) which generated deferred tax assets for NOL carryforwards. We 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 approximately $7,400 and $3,747 for the six months ended June 30, 2018 and 2017, respectively. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax 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, management believes it is more likely than not that the net deferred tax assets at June 30, 2018 will not be fully realizable. Accordingly, management has maintained a full valuation allowance against its net deferred tax assets at June 30, 2018. The valuation allowance carried against our net deferred tax assets was approximately $41,000 and $34,000 at June 30, 2018 and December 31, 2017, respectively. At June 30, 2018, we have federal and state net operating loss carryforwards of approximately $103,000 and $117,000, respectively, expiring beginning in 2027 and 2028, respectively. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, (“Topic 606”) which amends revenue recognition principles and provides a single set of criteria for revenue recognition among all industries. We adopted the new standard effective January 1, 2018 under the modified retrospective method. Under the modified retrospective method, we recognized deferred revenue of $2,500 through retained earnings. The tax provision is prepared based on the assumption that the Company will file accounting method change form 3115 with 2018 tax return to reflect the adoption of Topic 606. 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 uncertain tax positions as a component of income tax expense. As of June 30, 2018, we had accrued immaterial amounts of interest and penalties related to the uncertain tax positions.

Commitments and Related Party T

Commitments and Related Party Transactions	6 Months Ended
	Jun. 30, 2018
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 2019. 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 $75 and $683 compared to $213 and $472 in rental fees and reimbursements to the LLC during the three and six months ended June 30, 2018 and 2017, respectively. Our Chief Executive Officer and Chief Administrative Officer are the managing partners and control the equity interests of the LLC. We entered into a 12-month non-exclusive lease with LLC for use of the plane at a rate of $8 per flight hour, with no minimum usage requirement. The agreement contains other terms and conditions normal in such transactions and can be cancelled by either us or LLC with 30 days’ notice. The lease renews on an annual basis unless terminated by the lessor or lessee. Neither party has exercised their termination rights.

Stock-Based Compensation

Stock-Based Compensation	6 Months Ended
	Jun. 30, 2018
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. In May 2017, the Board approved an amendment and restatement of the Plan to, among other things, increase the shares reserved under the Plan by 2,500,000 shares (the “Plan Amendment”). Our stockholders approved of the Plan Amendment at the 2017 Annual Meeting of Stockholders held on June 1, 2017. The Plan provides for grants of 16,624,469 shares of our common stock, including stock options and restricted stock units (“RSUs”), and will expire in 2023. As of June 30, 2018, 1,780,315 shares remained available for grant under the Plan. During the three months ended June 30, 2018, we granted options for a total of 336,000 shares with a weighted average grant date fair value of $2.31 per options. During the three months ended June 30, 2017, we granted options totaling 331,000 shares with a weighted average grant date fair value of $2.72. During the six months ended June 30, 2018, we granted options for a total of 1,006,000 shares. The weighted average fair value at the grant dates for options issued during the six months ended June 30, 2018 was $2.52 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 six months ended June 30, 2018 (i) dividend yield on our common stock of 0 percent (ii) expected stock price volatility of 85 percent (iii) a risk-free interest rate of 2.65 percent and (iv) and expected option term of 6 years. During the six months ended June 30, 2017, we granted options for a total of 356,000 shares with a weighted average grant date fair value of $2.65. 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 six months ended June 30, 2017 (i) dividend yield on our common stock of 0 percent (ii) expected stock price volatility of 84 percent (iii) a risk-free interest rate average of 1.94 percent and (iv) an expected option term of 6 years. During the three months ended June 30, 2018 and 2017, we granted 223,997 and 220,664 RSUs, respectively. The weighted average fair values at the grant dates for RSUs issued during the three months ended June 30, 2018 and 2017 were $3.19 and $3.83 per RSU, respectively. RSUs, which are subject to forfeiture if service terminates prior to the shares vesting, are expensed ratably over the vesting period. During the three months ended June 30, 2018 and 2017, we paid $33 and $29 in withholding taxes on shares issued upon conversion of RSUs. The underlying shares were canceled. These amounts are reflected as financing costs in the accompanying statement of cash flows. During the six months ended June 30, 2018 and 2017, we granted 243,997 and 220,664 RSUs, respectively. The weighted average fair values at the grant dates for RSUs issued during the six months ended June 30, 2018 and 2017 were $3.28 and $3.83 per RSU, respectively. RSUs, which are subject to forfeiture if service terminates prior to the shares vesting, are expensed ratably over the vesting period. During the six months ended June 30, 2018 and 2017, we paid $33 and $29 in withholding taxes on shares issued upon conversion of RSUs. The underlying shares were canceled. These amounts are reflected as financing costs in the accompanying statement of cash flows. Stock-based compensation expense included in general and administrative expense was $467 and $855 and in research and development expense was $655 and $1,154 for the three and six months ended June 30, 2018, respectively, and $442 and $834 for general and administrative and $440 and $881 for research and development for the three and six months ended June 30, 2017, respectively. As of June 30, 2018, the unrecognized stock-based compensation expense related to non-vested stock options and RSUs was $7,160 and $2,001, respectively, which will be amortized over an estimated weighted average period of approximately 3.08 and 2.72 years, respectively. During the six-month period ended June 30, 2018 we issued 168,219 new shares of common stock as a result of vesting RSUs. No shares of common stock were issued as a result of stock options exercised during the period.

Equity

Equity	6 Months Ended
	Jun. 30, 2018
Equity [Abstract]
Equity	Note 6 — Equity Common Stock On August 21, 2015, we filed a universal shelf registration statement with the U.S. Securities and Exchange Commission enabling us to offer and sell from time to time up to $100,000 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 (“Cowen”) on August 20, 2015, under which we may offer and sell shares of our common stock having an aggregate value of up to $35,000. On March 8, 2018, we amended our August 20, 2015 equity offering sales agreement (“Amended Agreement”) with Cowen whereby the maximum aggregate value of the Company’s common stock (“Shares”) we may offer and sell, from time to time, was increased from $35,000 to $50,000. We intend to use the proceeds of 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. During the six months ended June 30, 2018, we sold 3,072,610 shares under the ATM. The average sales price per common share was $3.91 and the aggregate proceeds from the sales totaled $12,000 during the period. Sales commissions, fees and other costs associated with the ATM totaled $360. Warrants In 2015 we issued warrants (“Advisor Warrants”) for the purchase of 25,000 shares of common stock at an exercise price of $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. Information about warrants outstanding during the three months ended June 30, 2018 follows: Original Number of Warrants Issued Exercise Price per Common Share Exercisable at December 31, 2017 Became Exercisable Exercised Terminated / Cancelled / Expired Exercisable at June 30, 2018 Expiration Date 25,000 $ 7.00 25,000 — — — 25,000 April 2020 25,000 — — — 25,000

Litigation

Litigation	6 Months Ended
	Jun. 30, 2018
Litigation [Abstract]
Litigation	Note 7 — Litigation We have multiple intellectual property infringement lawsuits pending in the United States District Court for the Eastern District of Texas, Tyler Division (“USDC”), and United States Court of Appeals for the Federal Circuit (“USCAFC”). VirnetX Inc. v. Cisco Systems, Inc. et al. (Case 6:10-CV-00417-LED) (“Apple I”) On August 11, 2010, we filed a complaint against Aastra USA. Inc. (“Aastra”), Apple Inc. (“Apple”), Cisco Systems, Inc. (“Cisco”), and NEC Corporation (“NEC”) in the USDC in which we alleged that these parties infringe on certain of our patents (U.S. Patent Nos. 6,502,135, 7,418,504, 7,921,211 and 7,490,151). We sought damages and injunctive relief. The cases against each defendant were separated by the judge. Aastra and NEC agreed to sign license agreements with us and we dropped all accusations of infringement against them. A jury in USDC decided that our patents were not invalid and rendered a verdict of non-infringement by Cisco on March 4, 2013. Our motion for a new Cisco trial was denied and the case against Cisco was closed. On November 6, 2012, a jury in the USDC awarded us over $368,000 for Apple’s infringement of four of our patents, plus daily interest up to the final judgment. Apple filed an appeal of the judgment to the USCAFC. On September 16, 2014, USCAFC affirmed the USDC jury’s finding that all four of our patents at issue are valid and confirmed the USDC jury’s finding of infringement of VPN on Demand under many of the asserted claims of our ‘135 and ‘151 patents, and the USDC’s decision to allow evidence about our license and royalty rates regarding the determination of damages. However, the USCAFC vacated the USDC jury’s damages award and some of the USDC’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 back to the USDC for further proceedings. On September 30, 2016, pursuant to the 2014 remand from the USCAFC, a jury in the USDC, awarded us $302,400 for Apple’s infringement of four of our patents. On September 29, 2017, the USDC entered its final judgement, denied all of Apple’s post-trial motions, granted all our post-trial motions, including our motion for willful infringement and enhanced the royalty rate during the willfulness period from $1.20 to $1.80 per device, and awarded us costs, certain attorneys’ fees, and prejudgment interest. The total amount in the final judgement was $439,700, including $302,400 (jury verdict), $41,300 (enhanced damages) and $96,000 (costs, fees and interest). On October 27, 2017 Apple filed its notice of appeal of this final judgement to the USCAFC. Apple filed its opening brief on March 19, 2018. We filed our response on April 4, 2018. On April 11, 2018, USCAFC designated Cases 18-1197-CB, Case 17-1368 and Case 17-1591 VirnetX Inc. v. The Mangrove Partners (USCAFC Case 17-1368) (“Consolidated Appeal”) VirnetX Inc. v. Apple, Inc. (Case 6:12-CV-00855-LED) (“Apple II”) On April 12, 2018, an USDC jury awarded us $502,600 in this case. The same jury in the second part of the case determined that Apple had willfully infringed all the patents in the case, which per the jury instructions is reserved for only the most egregious behavior, such as where the infringement is malicious, deliberate, consciously wrongful, or done in bad faith. The verdict covers issues of infringement by products that were allegedly changed after the Apple I trial including, Apple’s redesigned VOD (VPN on Demand) in iOS 7 to iOS 11, the redesigned FaceTime in iOS 7 to iOS 11 and OS X 10.9 and later. This case began on November 6, 2012, when we had filed a complaint against Apple in USDC in which we alleged that Apple infringed on certain of our patents, (U.S. Patent Nos. 6,502,135, 7,418,504, 7,921,211 and 7,490,151). We sought damages and injunctive relief. The accused products include the iPhone 5, iPod Touch 5th Generation, iPad 4 th VirnetX Inc. v. The Mangrove Partners (USCAFC Case 17-1368) (“Consolidated Appeal”) On April 11, 2018, the USCAFC in an order designated following appeals · VirnetX Inc. v. The Mangrove Partners (USCAFC Case 17-1368) On December 16, 2016, we filed appeals with the USCAFC, appealing the invalidity findings by the Patent Trial and Appeal Board (“PTAB”) in IPR2015-01046, and on December 20, 2016 for IPR2015-1047, involving our U.S. Patent Nos. 6,502,135, and 7,490,151. These appeals also involve Apple, Inc. and one of them involves Black Swamp IP, LLC. These appeals have been consolidated into a single case. · VirnetX Inc. v. Cisco Systems, Inc. (USCAFC Case 18-1197-CB) (Appeal of Apple I Case) On October 27, 2017 Apple filed its notice of appeal of the Final Judgment entered on September 29, 2017 to the United States Court of Appeals for the Federal Circuit. · VirnetX Inc. v. Apple Inc., Cisco Systems, Inc. (USCAFC Case 17-1591) On February 7, 2017, we filed appeals with the USCAFC, appealing the invalidity findings by the PTAB in inter-parties’ reexamination nos. 95/001,788, 95/001,789, and 95/001,856 related to our U.S. Patent Nos. 7,921,211 and 7,418,504 . The written briefing in all these USCAFC cases have been concluded; the oral arguments have not yet been scheduled. VirnetX Inc. v. Apple Inc. (Case 17-2490) On August 23, 2017, we filed with the USCAFC appeals of the invalidity findings by the PTAB in IPR2016-00331 and IPR2016-00332 involving our U.S. Patent No. 8,504,696. The briefing in these appeals has been concluded; the oral arguments have not yet been scheduled. VirnetX Inc. (Case 17-2593) On September 22, 2017, we filed with the USCAFC, appeals of the invalidity findings by the PTAB in IPR2016-00693 and IPR2016-00957 involving our U.S. Patent Nos. 7,418,504 and 7,921,211. The briefing in these appeals has not taken place. The entity that initiated the IPRs, Black Swamp IP, LLC, indicated on October 18, 2017, that it would not participate in the appeals. On November 27, 2017, the USPTO indicated that it would intervene in the appeals. On January 19, 2018, the USCAFC stayed these appeals pending the USCAFC’s decision in Case 17-1591. 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 likely valid, commencing a lawsuit can be expensive and time-consuming, and there is no assurance that we could prevail on such potential claims if we made them. In addition, bringing a lawsuit may lead to potential counterclaims which may distract our management and our other resources, including capital resources, from efforts to successfully commercialize our products. Currently, we are not a party to any other pending legal proceedings and are not aware of any proceeding threatened or contemplated against us.

Effects of Adopting ASU Topic 6

Effects of Adopting ASU Topic 606	6 Months Ended
	Jun. 30, 2018
Effects of Adopting ASU Topic 606 [Abstract]
Effects of Adopting ASU Topic 606	Note 8 — Effects of Adopting ASU Topic 606 The following tables summarize the effects of adopting this standard on our unaudited condensed consolidated financial statements: Balance Sheet Highlights Reported As of December 31, 2017 Effects of Adopting Topic 606 As of January 1, 2018 Current liabilities: Deferred revenue, current portion $ 1,500 $ (1,500 ) $ — Total current liabilities $ 4,482 $ (1,500 ) $ 2,982 Deferred revenue, non-current portion 1,000 (1,000 ) — Other liabilities 140 — 140 Total Liabilities $ 5,622 $ (2,500 ) $ 3,122 Accumulated deficit $ (175,516 ) $ 2,500 $ (173,016 ) Total Stockholder’s Equity $ 1,553 $ 2,500 $ 4,053 As of June 30, 2018 Pre-Topic 606 Effects of Adopting Topic 606 As of June 30, 2018 (as reported) Deferred revenue, current portion $ 1,500 $ (1,500 ) $ — Total current liabilities $ 5,084 $ (1,500 ) $ 3,584 Deferred revenue, non-current portion 250 (250 ) — Other liabilities 140 — 140 Total liabilities $ 5,474 $ (1,750 ) $ 3,724 Accumulated deficit (188,820 ) 1,750 (187,070 ) Total stockholders’ equity $ 1,897 $ 1,750 $ 3,647 Income Statement Highlights Six Months Ended June 30, 2018 Pre-Topic 606 Six Months Ended June 30, 2018 Effects of Adopting Topic 606 Six Months Ended June 30, 2018 (as reported) Revenue $ 772 $ (750 ) $ 22 Loss from operations (13,320 ) (750 ) (14,070 ) Interest income, net 20 — 20 Loss before taxes (13,300 ) (750 ) (14,050 ) Provision for income taxes (5 ) — (5 ) Net loss $ (13,305 ) $ (750 ) $ (14,055 ) Three Months Ended June 30, 2018 Pre-Topic 606 Three Months Ended June 30, 2018 Effects of Adopting Topic 606 Three Months Ended June 30, 2018 (as reported) Revenue $ 391 $ (375 ) $ 16 Loss from operations (6,087 ) (375 ) (6,462 ) Interest income, net 12 — 12 Loss before taxes (6,075 ) (375 ) (6,450 ) Net loss $ (6,075 ) $ (375 ) $ (6,450 ) Cash Flow Statement Highlights Six Months Ended June 30, 2018 Pre-Topic 606 Six Months Ended June 30, 2018 Effects of Adopting Topic 606 Six Months Ended June 30, 2018 (as reported) Net loss $ (13,305 ) $ (750 ) $ (14,055 ) Adjustments to reconcile net loss to net cash used in operating activities: Deferred revenue (750 ) 750 — Net cash used in operating activities (11,484 ) — (11,484 )

Subsequent Events

Subsequent Events	6 Months Ended
	Jun. 30, 2018
Subsequent Events [Abstract]
Subsequent Events	Note 9 — Subsequent Events Between July 1, 2018 and August 6, 2018, we sold 297,652 shares of common stock under the ATM program. The average sales price per common share sold was $3.48 and the aggregate proceeds from the sales totaled $1,036. Sales commissions, fees and other costs associated with the ATM transactions totaled $31. On July 8, 2018 we issued 31,865 new shares of common stock as a result of vesting RSUs.

Basis of Presentation and Sum16

Basis of Presentation and Summary of Significant Accounting Policies (Policies)	6 Months Ended
	Jun. 30, 2018
Basis of Presentation and Summary of Significant Accounting Policies [Abstract]
Unaudited Interim Financial Information	Unaudited Interim Financial Information The accompanying Condensed Consolidated Balance Sheet as of June 30, 2018, the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017, the Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2018 and 2017, and the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017 are unaudited. These unaudited interim condensed 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 condensed consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair presentation of our financial position as of June 30, 2018, our results of operations for the three and six months ended June 30, 2018 and 2017, and our cash flows for the six months ended June 30, 2018 and 2017. The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018. These unaudited interim condensed 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, 2017, filed with the SEC on March 16, 2018.
Use of Estimates	Use of Estimates We prepare our condensed consolidated financial statements in accordance with U.S. GAAP. In doing so, we have to 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 condensed consolidated financial statements include the accounts of VirnetX Holding Corporation and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated.
Reclassifications	Reclassifications Certain prior period amounts were reclassified to conform to the current year’s presentation. None of these reclassifications had an impact on reported operating expenses, operating income or net income for any of the periods presented.
Revenue Recognition	Revenue Recognition Most of our revenue historically has been derived from licensing and royalty fees from contracts with customers which often spanned several years. We account for revenue in accordance with Accounting Standards Update (“ASU”) No.2014-09, Revenue from Contracts with Customers “Topic 606”, which we adopted on January 1, 2018 using the modified-retrospective method (see Note 8 – Effects of Adopting ASU Topic 606). Prior to January 1, 2018 we recognized revenue in accordance with previous guidance as described in our Annual Report on Form 10-K for the year ended December 31, 2017. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer in accordance with Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Our revenue arrangements may consist of multiple-element arrangements, with revenue for each unit of accounting recognized as the product or service is delivered to the customer. With the licensing of our patents, Certain contracts may require our customers to enter into a hosting arrangement with us and for these arrangements revenue is recognized over time, generally over the life of the servicing contract.
Deferred Revenue	Deferred revenue From 2013 to 2016, we received contractual payments totaling $10,000. In accordance with our revenue recognition policy, we deferred and then recognized revenue over the life of the contract, but not ahead of collection. We recognized $375 and $750 of revenue, related to this contract during the three and six months ended June 30, 2017. On January 1, 2018, we adopted Topic 606 and applied the modification retrospective approach as discussed above.
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 six months ended June 30, 2018 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.
Prepaid Expenses	Prepaid Expenses Prepaid expenses at June 30, 2018 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 to be impaired, the impairment to be 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 June 30, 2018, and December 31, 2017. June 30, 2018 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Investments Available for Sale Cash $ 2,056 $ - $ - $ 2,056 $ 2,056 $ - Level 1: Mutual funds 1,087 - - 1,087 1,087 - U.S. government securities 80 - - 80 - 80 U.S. agency securities 1,468 1 - 1,469 825 644 2,635 1 - 2,636 1,912 724 Total $ 4,691 $ 1 $ - $ 4,692 $ 3,968 $ 724 December 31, 2017 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Investments Available for Sale Cash $ 1,972 $ — $ — $ 1,972 $ 1,972 $ — Level 1: Mutual funds 616 — — 616 616 U.S. agency securities 2,001 — (1 ) 2,000 547 1,453 2,617 — (1 ) 2,616 1,163 1,453 Total $ 4,589 $ — $ (1 ) $ 4,588 $ 3,135 $ 1,453
New Accounting Pronouncements	New Accounting Pronouncements In June 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-07, Compensation—Stock Compensation (“Topic 718”)—Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year and early adoption is permitted. We adopted the ASU effective June 30, 2018, which had no material impact on our financial position or statement of operations. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (“Topic 326”). 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 evaluating the impact this guidance will have on our financial position and statement of operations. In February 2016, FASB issued ASU No. 2016-02, Leases (“Topic 842”). Topic 842 requires an entity to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. For public companies, Topic 842 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early adoption permitted. We are evaluating the impact this guidance will have on our financial position and statement of operations. In May 2014, the FASB issued ASU No. 2014-09 Revenue from Contracts with Customers (“Topic 606”). As amended, Topic 606 supersedes prior revenue recognition requirements including most industry-specific revenue recognition guidance. In summary, the core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. On January 1, 2018 we adopted this standard which resulted in a $2,500 decrease in accumulated deficit and a $2,500 decrease in deferred revenue in our consolidated balance sheet (see Note 8 — Effects of Adopting ASU Topic 606).

Basis of Presentation and Sum17

Basis of Presentation and Summary of Significant Accounting Policies (Tables)	6 Months Ended
	Jun. 30, 2018
Basis of Presentation and Summary of Significant Accounting Policies [Abstract]
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 June 30, 2018, and December 31, 2017. June 30, 2018 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Investments Available for Sale Cash $ 2,056 $ - $ - $ 2,056 $ 2,056 $ - Level 1: Mutual funds 1,087 - - 1,087 1,087 - U.S. government securities 80 - - 80 - 80 U.S. agency securities 1,468 1 - 1,469 825 644 2,635 1 - 2,636 1,912 724 Total $ 4,691 $ 1 $ - $ 4,692 $ 3,968 $ 724 December 31, 2017 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Investments Available for Sale Cash $ 1,972 $ — $ — $ 1,972 $ 1,972 $ — Level 1: Mutual funds 616 — — 616 616 U.S. agency securities 2,001 — (1 ) 2,000 547 1,453 2,617 — (1 ) 2,616 1,163 1,453 Total $ 4,589 $ — $ (1 ) $ 4,588 $ 3,135 $ 1,453

Equity (Tables)

Equity (Tables)	6 Months Ended
	Jun. 30, 2018
Equity [Abstract]
Information about Warrants Outstanding	Information about warrants outstanding during the three months ended June 30, 2018 follows: Original Number of Warrants Issued Exercise Price per Common Share Exercisable at December 31, 2017 Became Exercisable Exercised Terminated / Cancelled / Expired Exercisable at June 30, 2018 Expiration Date 25,000 $ 7.00 25,000 — — — 25,000 April 2020 25,000 — — — 25,000

Effects of Adopting ASU Topic19

Effects of Adopting ASU Topic 606 (Tables)	6 Months Ended
	Jun. 30, 2018
Effects of Adopting ASU Topic 606 [Abstract]
Effects of Adopting New Accounting Standard on Financial Statements	The following tables summarize the effects of adopting this standard on our unaudited condensed consolidated financial statements: Balance Sheet Highlights Reported As of December 31, 2017 Effects of Adopting Topic 606 As of January 1, 2018 Current liabilities: Deferred revenue, current portion $ 1,500 $ (1,500 ) $ — Total current liabilities $ 4,482 $ (1,500 ) $ 2,982 Deferred revenue, non-current portion 1,000 (1,000 ) — Other liabilities 140 — 140 Total Liabilities $ 5,622 $ (2,500 ) $ 3,122 Accumulated deficit $ (175,516 ) $ 2,500 $ (173,016 ) Total Stockholder’s Equity $ 1,553 $ 2,500 $ 4,053 As of June 30, 2018 Pre-Topic 606 Effects of Adopting Topic 606 As of June 30, 2018 (as reported) Deferred revenue, current portion $ 1,500 $ (1,500 ) $ — Total current liabilities $ 5,084 $ (1,500 ) $ 3,584 Deferred revenue, non-current portion 250 (250 ) — Other liabilities 140 — 140 Total liabilities $ 5,474 $ (1,750 ) $ 3,724 Accumulated deficit (188,820 ) 1,750 (187,070 ) Total stockholders’ equity $ 1,897 $ 1,750 $ 3,647 Income Statement Highlights Six Months Ended June 30, 2018 Pre-Topic 606 Six Months Ended June 30, 2018 Effects of Adopting Topic 606 Six Months Ended June 30, 2018 (as reported) Revenue $ 772 $ (750 ) $ 22 Loss from operations (13,320 ) (750 ) (14,070 ) Interest income, net 20 — 20 Loss before taxes (13,300 ) (750 ) (14,050 ) Provision for income taxes (5 ) — (5 ) Net loss $ (13,305 ) $ (750 ) $ (14,055 ) Three Months Ended June 30, 2018 Pre-Topic 606 Three Months Ended June 30, 2018 Effects of Adopting Topic 606 Three Months Ended June 30, 2018 (as reported) Revenue $ 391 $ (375 ) $ 16 Loss from operations (6,087 ) (375 ) (6,462 ) Interest income, net 12 — 12 Loss before taxes (6,075 ) (375 ) (6,450 ) Net loss $ (6,075 ) $ (375 ) $ (6,450 ) Cash Flow Statement Highlights Six Months Ended June 30, 2018 Pre-Topic 606 Six Months Ended June 30, 2018 Effects of Adopting Topic 606 Six Months Ended June 30, 2018 (as reported) Net loss $ (13,305 ) $ (750 ) $ (14,055 ) Adjustments to reconcile net loss to net cash used in operating activities: Deferred revenue (750 ) 750 — Net cash used in operating activities (11,484 ) — (11,484 )

Business Description (Details)

Business Description (Details) - Patents [Member]	Jun. 30, 2018Patent
Business Description [Abstract]
Number of patents and pending applications	185
U.S. [Member]
Business Description [Abstract]
Number of patents and pending applications	70
Foreign [Member]
Business Description [Abstract]
Number of patents and pending applications	115

Basis of Presentation and Sum21

Basis of Presentation and Summary of Significant Accounting Policies (Details) $ in Thousands	3 Months Ended	6 Months Ended		12 Months Ended
	Jun. 30, 2017USD ($)	Jun. 30, 2018USD ($)Institution	Jun. 30, 2017USD ($)	Dec. 31, 2017USD ($)	Dec. 31, 2016USD ($)
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
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	$ 2,212	$ 3,968	$ 2,212	$ 3,135	$ 6,627
Adjusted Cost		2,635		2,617
Unrealized Gains		1		0
Unrealized Losses		0		(1)
Fair Value		2,636		2,616
Adjusted Cost		4,691		4,589
Fair Value		4,692		4,588
Investments Available for Sale		2,636		2,616
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		2,056		1,972
Fair Value		2,056		1,972
Cash and Cash Equivalents		2,056		1,972
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		1,087		616
Unrealized Gains		0		0
Unrealized Losses		0		0
Fair Value		1,087		616
Investments Available for Sale		1,087		616
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		80
Unrealized Gains		0
Unrealized Losses		0
Fair Value		80
Investments Available for Sale		80
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		1,468		2,001
Unrealized Gains		1		0
Unrealized Losses		0		(1)
Fair Value		1,469		2,000
Investments Available for Sale		1,469		2,000
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		3,968		3,135
Fair Value		724		1,453
Cash and Cash Equivalents		3,968		3,135
Investments Available for Sale		724		1,453
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		2,056		1,972
Cash and Cash Equivalents		2,056		1,972
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		1,912		1,163
Fair Value		724		1,453
Cash and Cash Equivalents		1,912		1,163
Investments Available for Sale		724		1,453
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		1,087		616
Fair Value		0
Cash and Cash Equivalents		1,087		616
Investments Available for Sale		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
Fair Value		80
Cash and Cash Equivalents		0
Investments Available for Sale		80
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		825		547
Fair Value		644		1,453
Cash and Cash Equivalents		825		547
Investments Available for Sale		644		1,453
2013 to 2016 Contract [Member]
Deferred Revenue [Abstract]
Total contractual payments received		$ 10,000
Revenue recognized	$ 375		$ 750
ASU 2014-09 [Member]
Deferred Revenue [Abstract]
Revenue recognized				2,500
ASU 2014-09 [Member] | Retained Earnings [Member]
New Accounting Pronouncements [Abstract]
Cumulative effect adjustments				(2,500)
ASU 2014-09 [Member] | Deferred Revenue [Member]
New Accounting Pronouncements [Abstract]
Cumulative effect adjustments				$ (2,500)

Income Taxes (Details)

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Income Taxes [Abstract]
Income tax expense	$ 0	$ 0	$ 5	$ 5
Net change in valuation allowance			7,400	$ 3,747
Valuation allowance carried against net deferred tax assets	41,000		41,000		$ 34,000
ASU 2014-09 [Member]
Income Taxes [Abstract]
Deferred revenue recognized					$ 2,500
Federal [Member]
Income Taxes [Abstract]
Net operating loss carryforwards	103,000		$ 103,000
Federal [Member] | Earliest Tax Year [Member]
Income Taxes [Abstract]
Operating loss carryforwards, expiration dates			Dec. 31, 2027
State [Member]
Income Taxes [Abstract]
Net operating loss carryforwards	$ 117,000		$ 117,000
State [Member] | Earliest Tax Year [Member]
Income Taxes [Abstract]
Operating loss carryforwards, expiration dates			Dec. 31, 2028

Commitments and Related Party23

Commitments and Related Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Office and Aircraft Leases [Abstract]
Term of lease	10 years		10 years
Offices [Member]
Office and Aircraft Leases [Abstract]
Operating lease expiration date			Oct. 31, 2019
K2 Investment Fund LLC [Member] | Aircraft [Member]
Office and Aircraft Leases [Abstract]
Rental fees incurred for use of aircraft	$ 75	$ 213	$ 683	$ 472
Term of lease	12 months		12 months
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	1 Months Ended	3 Months Ended		6 Months Ended
	May 31, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Share-based Compensation [Abstract]
Withholding taxes paid on shares issued upon conversion of RSUs				$ 33	$ 29
Stock-based compensation expense				2,008	1,715
General and Administrative Expense [Member]
Share-based Compensation [Abstract]
Stock-based compensation expense		$ 467	$ 442	855	834
Research and Development Expense [Member]
Share-based Compensation [Abstract]
Stock-based compensation expense		$ 655	$ 440	$ 1,154	$ 881
Stock Options [Member]
Share-based Compensation [Abstract]
Options granted (in shares)		336,000	331,000	1,006,000	356,000
Options granted, weighted average grant date fair value (in dollars per share)		$ 2.31	$ 2.72	$ 2.52	$ 2.65
Dividend yield				0.00%	0.00%
Expected stock price volatility				85.00%	84.00%
Risk-free interest rate				2.65%	1.94%
Expected option term				6 years	6 years
Unrecognized stock-based compensation expense expected to be recognized related to non-vested stock options		$ 7,160		$ 7,160
Weighted average amortization period				3 years 29 days
Options exercised (in shares)				0
Restricted Stock Units (RSUs) [Member]
Share-based Compensation [Abstract]
RSUs granted (in shares)		223,997	220,664	243,997	220,664
Weighted average grant date fair value of RSU's granted (in dollars per share)		$ 3.19	$ 3.83	$ 3.28	$ 3.83
Withholding taxes paid on shares issued upon conversion of RSUs		$ 33	$ 29	$ 33	$ 29
Unrecognized stock-based compensation expense expected to be recognized related to non-vested RSUs		$ 2,001		$ 2,001
Weighted average amortization period				2 years 8 months 19 days
New shares of common stock issued as a result of vesting RSUs (in shares)				168,219
2013 Plan [Member]
Share-based Compensation [Abstract]
Additional shares authorized for issuance (in shares)	2,500,000
Shares authorized for issuance (in shares)		16,624,469		16,624,469
Shares available for grant (in shares)		1,780,315		1,780,315

Equity, Common Stock (Details)

Equity, Common Stock (Details) - Common Stock [Member] - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2018	Mar. 08, 2018	Aug. 21, 2015	Aug. 20, 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		$ 50,000		$ 35,000
Number of shares of common stock sold (in shares)	3,072,610
Average sales price per common share (in dollars per share)	$ 3.91
Aggregate proceeds from sales of common stock	$ 12,000
Sales commissions, fees and other costs associated with issuance of common stock	$ 360

Equity, Warrants (Details)

Equity, Warrants (Details) - Warrants [Member]	6 Months Ended
	Jun. 30, 2018$ / sharesshares
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
Advisor Warrants [Member]
Information about warrants outstanding [Abstract]
Original number of warrants issued (in shares)	25,000
Exercise price per common share (in dollars per share) | $ / shares	$ 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
Expiration date	Apr. 30, 2020

Litigation (Details)

Litigation (Details) - Positive Outcome of Litigation [Member]	Apr. 12, 2018USD ($)	Sep. 29, 2017USD ($)	Sep. 30, 2016USD ($)Patent	Nov. 06, 2012USD ($)Patent
VirnetX Inc. v. Cisco Systems, Inc. et al. (Case 6:10-CV-00417-LED) ("Apple I") [Member]
Litigation [Abstract]
Amount of damages awarded in patent infringement case		$ 439,700,000	$ 302,400,000
Number of patents allegedly infringed upon by Apple, Inc. | Patent			4	4
Enhanced damages		41,300,000
Additional amount granted in agreed bill of costs, attorney fees, and prejudgment interest		(96,000,000)
VirnetX Inc. v. Cisco Systems, Inc. et al. (Case 6:10-CV-00417-LED) ("Apple I") [Member] | Minimum [Member]
Litigation [Abstract]
Amount of damages awarded in patent infringement case				$ 368,000,000
Royalty rate per device used in calculating infringement damages		1.20
VirnetX Inc. v. Cisco Systems, Inc. et al. (Case 6:10-CV-00417-LED) ("Apple I") [Member] | Maximum [Member]
Litigation [Abstract]
Royalty rate per device used in calculating infringement damages		$ 1.80
VirnetX Inc. v. Apple, Inc. (Case 6:12-CV-00855-LED) ("Apple II") [Member]
Litigation [Abstract]
Amount of damages awarded in patent infringement case	$ 502,600,000

Effects of Adopting ASU Topic28

Effects of Adopting ASU Topic 606, Balance Sheet Highlights (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Current liabilities [Abstract]
Deferred revenue, current portion	$ 0	$ 1,500
Total current liabilities	3,584	4,482
Deferred revenue, non-current portion	0	1,000
Other liabilities	140	140
Total liabilities	3,724	5,622
Accumulated deficit	(187,070)	(175,516)
Total stockholders' equity	3,647	1,553
Pre-Topic 606 [Member]
Current liabilities [Abstract]
Deferred revenue, current portion	1,500
Total current liabilities	5,084
Deferred revenue, non-current portion	250
Other liabilities	140
Total liabilities	5,474
Accumulated deficit	(188,820)
Total stockholders' equity	1,897
Effects of Adopting Topic 606 [Member] | ASU Topic 606 [Member]
Current liabilities [Abstract]
Deferred revenue, current portion	(1,500)	(1,500)
Total current liabilities	(1,500)	(1,500)
Deferred revenue, non-current portion	(250)	(1,000)
Other liabilities	0	0
Total liabilities	(1,750)	(2,500)
Accumulated deficit	1,750	2,500
Total stockholders' equity	$ 1,750	2,500
Post-Topic 606 [Member]
Current liabilities [Abstract]
Deferred revenue, current portion		0
Total current liabilities		2,982
Deferred revenue, non-current portion		0
Other liabilities		140
Total liabilities		3,122
Accumulated deficit		(173,016)
Total stockholders' equity		$ 4,053

Effects of Adopting ASU Topic29

Effects of Adopting ASU Topic 606, Income Statement Highlights (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Income Statement Highlights [Abstract]
Revenue	$ 16	$ 396	$ 22	$ 771
Loss from operations	(6,462)	(3,811)	(14,070)	(7,717)
Interest income, net	12	13	20	31
Loss before taxes	(6,450)	(3,798)	(14,050)	(7,686)
Provision for income taxes	0	0	(5)	(5)
Net loss	(6,450)	$ (3,798)	(14,055)	$ (7,691)
Pre-Topic 606 [Member]
Income Statement Highlights [Abstract]
Revenue	391		772
Loss from operations	(6,087)		(13,320)
Interest income, net	12		20
Loss before taxes	(6,075)		(13,300)
Provision for income taxes			(5)
Net loss	(6,075)		(13,305)
Effects of Adopting Topic 606 [Member] | ASU Topic 606 [Member]
Income Statement Highlights [Abstract]
Revenue	(375)		(750)
Loss from operations	(375)		(750)
Interest income, net	0		0
Loss before taxes	(375)		(750)
Provision for income taxes			0
Net loss	$ (375)		$ (750)

Effects of Adopting ASU Topic30

Effects of Adopting ASU Topic 606, Cash Flow Statement Highlights (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Cash Flow Statement Highlights [Abstract]
Net loss	$ (6,450)	$ (3,798)	$ (14,055)	$ (7,691)
Adjustments to reconcile net loss to net cash used in operating activities [Abstract]
Deferred revenue			0	(750)
Net cash used in operating activities			(11,484)	$ (9,390)
Pre-Topic 606 [Member]
Cash Flow Statement Highlights [Abstract]
Net loss	(6,075)		(13,305)
Adjustments to reconcile net loss to net cash used in operating activities [Abstract]
Deferred revenue			(750)
Net cash used in operating activities			(11,484)
Effects of Adopting Topic 606 [Member] | ASU Topic 606 [Member]
Cash Flow Statement Highlights [Abstract]
Net loss	$ (375)		(750)
Adjustments to reconcile net loss to net cash used in operating activities [Abstract]
Deferred revenue			750
Net cash used in operating activities			$ 0

Subsequent Events (Details)

Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Thousands	Jul. 08, 2018	Aug. 06, 2018	Jun. 30, 2018
Restricted Stock Units (RSUs) [Member]
Stock Transactions [Abstract]
New shares of common stock issued as a result of vesting RSUs (in shares)			168,219
ATM Agreement [Member] | Common Stock [Member]
Stock Transactions [Abstract]
Number of shares of common stock sold (in shares)			3,072,610
Average sales price per common share (in dollars per share)			$ 3.91
Aggregate proceeds from sales of common stock			$ 12,000
Sales commissions, fees and other costs associated with issuance of common stock			$ 360
Subsequent Event [Member] | Restricted Stock Units (RSUs) [Member]
Stock Transactions [Abstract]
New shares of common stock issued as a result of vesting RSUs (in shares)	31,865
Subsequent Event [Member] | ATM Agreement [Member] | Common Stock [Member]
Stock Transactions [Abstract]
Number of shares of common stock sold (in shares)		297,652
Average sales price per common share (in dollars per share)		$ 3.48
Aggregate proceeds from sales of common stock		$ 1,036
Sales commissions, fees and other costs associated with issuance of common stock		$ 31