VirnetX Holding (VHC) 10-Q 8 Nov 19 2019 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Nov. 06, 2019
Cover [Abstract]
Entity Registrant Name	VirnetX Holding Corp
Entity Central Index Key	0001082324
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Shell Company	false
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		69,510,097
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Entity Address, State or Province	NV

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 2,572	$ 7,611
Investments available for sale	2,621	1,803
Accounts receivables	6	6
Prepaid expenses and other current assets	315	718
Total current assets	5,514	10,138
Other assets	1,721	1,604
Property and equipment, net	5	9
Total assets	7,240	11,751
Current liabilities:
Accounts payable and accrued liabilities	1,168	1,050
Accrued payroll and related expenses	292	277
Other current liabilities	140	140
Income tax liability	0	396
Total current liabilities	1,600	1,863
Commitments and contingencies (Note 4)
Stockholders' equity:
Preferred stock, par value $0.0001 per share Authorized: 10,000,000 shares at September 30, 2019 and December 31, 2018 Issued and outstanding: 0 shares at September 30, 2019 and December 31, 2018	0	0
Common stock, par value $0.0001 per share Authorized: 100,000,000 shares at September 30, 2019 and December 31, 2018 Issued and outstanding: 68,958,301 shares and 66,879,847 shares, at September 30, 2019 and December 31, 2018, respectively	7	7
Additional paid-in capital	218,761	208,317
Accumulated deficit	(213,116)	(198,422)
Accumulated other comprehensive loss	(12)	(14)
Total stockholders' equity	5,640	9,888
Total liabilities and stockholders' equity	$ 7,240	$ 11,751

CONDENSED CONSOLIDATED BALANC_2

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2019	Dec. 31, 2018
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)	68,958,301	66,879,847
Common stock, shares outstanding (in shares)	68,958,301	66,879,847

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) [Abstract]
Revenue	$ 4	$ 7	$ 50	$ 28
Operating expense:
Research and development	964	932	2,886	3,123
Selling, general and administrative expenses	4,016	4,023	12,326	15,923
Total operating expense	4,980	4,955	15,212	19,046
Loss from operations	(4,976)	(4,948)	(15,162)	(19,018)
Interest and other income, net	20	14	75	34
Loss before taxes	(4,956)	(4,934)	(15,087)	(18,984)
Income tax benefit (expense)	0	0	393	(5)
Net loss	$ (4,956)	$ (4,934)	$ (14,694)	$ (18,989)
Basic and diluted loss per share (in dollars per share)	$ (0.07)	$ (0.08)	$ (0.22)	$ (0.31)
Weighted average shares outstanding basic and diluted (in shares)	68,943	63,385	68,278	61,691

CONDENSED CONSOLIDATED STATEM_2

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) [Abstract]
Net loss	$ (4,956)	$ (4,934)	$ (14,694)	$ (18,989)
Other comprehensive gain (loss), net of tax:
Change in unrealized gain (loss) on investments, net of tax	1	(1)	2	(1)
Total other comprehensive income gain (loss), net of tax	1	(1)	2	(1)
Comprehensive loss	$ (4,955)	$ (4,935)	$ (14,692)	$ (18,990)

CONDENSED CONSOLIDATED STATEM_3

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Loss [Member]	Total
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect of accounting change | ASC 606 [Member]			$ 2,500		$ 2,500
Balance at Dec. 31, 2017	$ 6	$ 177,076	(175,516)	$ (13)	1,553
Balance (in shares) at Dec. 31, 2017	59,051,978
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock issued for cash, net		6,830			6,830
Stock issued for cash, net (in shares)	1,751,689
Stock-based compensation		887			887
Stock issued for vested RSUs (in shares)	20,000
Comprehensive (loss):
Net Loss			(7,605)		(7,605)
Other comprehensive income (loss), net of tax				1	1
Comprehensive loss					(7,604)
Balance at Mar. 31, 2018	$ 6	184,793	(180,621)	(12)	4,166
Balance (in shares) at Mar. 31, 2018	60,823,667
Balance at Dec. 31, 2017	$ 6	177,076	(175,516)	(13)	1,553
Balance (in shares) at Dec. 31, 2017	59,051,978
Comprehensive (loss):
Net Loss					(18,989)
Other comprehensive income (loss), net of tax					(1)
Comprehensive loss					(18,990)
Balance at Sep. 30, 2018	$ 7	205,375	(192,004)	(14)	13,363
Balance (in shares) at Sep. 30, 2018	66,376,184
Balance at Mar. 31, 2018	$ 6	184,793	(180,621)	(12)	4,166
Balance (in shares) at Mar. 31, 2018	60,823,667
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock issued for cash, net		4,809			4,809
Stock issued for cash, net (in shares)	1,320,921
Stock-based compensation		1,121			1,121
Stock issued for vested RSUs (in shares)	148,219
Comprehensive (loss):
Net Loss			(6,450)		(6,450)
Comprehensive loss					(6,450)
Balance at Jun. 30, 2018	$ 6	190,723	(187,071)	(12)	3,646
Balance (in shares) at Jun. 30, 2018	62,292,807
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock issued for cash, net		13,634			13,635
Stock issued for cash, net (in shares)	4,083,377
Stock-based compensation		1,018			1,018
Comprehensive (loss):
Net Loss			(4,934)		(4,934)
Other comprehensive income (loss), net of tax				(2)	(1)
Comprehensive loss					(4,935)
Balance at Sep. 30, 2018	$ 7	205,375	(192,004)	(14)	13,363
Balance (in shares) at Sep. 30, 2018	66,376,184
Balance at Dec. 31, 2018	$ 7	208,317	(198,422)	(14)	9,888
Balance (in shares) at Dec. 31, 2018	66,879,847
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock issued for cash, net		2,848			2,848
Stock issued for cash, net (in shares)	560,338
Stock-based compensation		785			785
Exercise of options		816			816
Exercise of options (in shares)	663,816
Comprehensive (loss):
Net Loss			(5,608)		(5,608)
Other comprehensive income (loss), net of tax				1	1
Comprehensive loss					(5,607)
Balance at Mar. 31, 2019	$ 7	212,766	(204,030)	(13)	8,730
Balance (in shares) at Mar. 31, 2019	68,104,001
Balance at Dec. 31, 2018	$ 7	208,317	(198,422)	(14)	9,888
Balance (in shares) at Dec. 31, 2018	66,879,847
Comprehensive (loss):
Net Loss					(14,694)
Other comprehensive income (loss), net of tax					2
Comprehensive loss					(14,692)
Balance at Sep. 30, 2019	$ 7	218,761	(213,116)	(12)	5,640
Balance (in shares) at Sep. 30, 2019	68,958,301
Balance at Mar. 31, 2019	$ 7	212,766	(204,030)	(13)	8,730
Balance (in shares) at Mar. 31, 2019	68,104,001
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock issued for cash, net		2,849			2,849
Stock issued for cash, net (in shares)	467,928
Stock-based compensation		928			928
Stock issued for vested RSUs (in shares)	182,618
Comprehensive (loss):
Net Loss			(4,130)		(4,130)
Comprehensive loss					(4,130)
Balance at Jun. 30, 2019	$ 7	216,543	(208,160)	(13)	8,377
Balance (in shares) at Jun. 30, 2019	68,754,547
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock issued for cash, net		1,219			1,219
Stock issued for cash, net (in shares)	203,754
Stock-based compensation		999			999
Comprehensive (loss):
Net Loss			(4,956)		(4,956)
Other comprehensive income (loss), net of tax				1	1
Comprehensive loss					(4,955)
Balance at Sep. 30, 2019	$ 7	$ 218,761	$ (213,116)	$ (12)	$ 5,640
Balance (in shares) at Sep. 30, 2019	68,958,301

CONDENSED CONSOLIDATED STATEM_4

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018
Stock issued for cash, net (in dollars per share)						$ 4.02
Minimum [Member]
Stock issued for cash, net (in dollars per share)	$ 5.53	$ 6.02	$ 5.05	$ 3	$ 3.45
Maximum [Member]
Stock issued for cash, net (in dollars per share)	$ 6.28	$ 6.49	$ 5.42	$ 4.89	$ 4.13

CONDENSED CONSOLIDATED STATEM_5

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Cash flows from operating activities:
Net loss	$ (14,694)	$ (18,989)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	4	14
Stock-based compensation	2,712	3,026
Changes in assets and liabilities:
Prepaid expenses and other assets	286	89
Accounts payable and accrued liabilities	118	(18)
Accrued payroll and related expenses	62	(1,882)
Accounts receivable	0	(4)
Income tax liability	(396)	5
Net cash used in operating activities	(11,908)	(17,759)
Cash flows from investing activities:
Purchase of investments	(5,319)	(1,430)
Proceeds from sale or maturity of investments	4,503	2,219
Net cash (used in) provided by investing activities	(816)	789
Cash flows from financing activities:
Proceeds from exercise of options	816	0
Proceeds from sale of common stock	6,916	25,273
Payments of taxes on cashless exercise of restricted stock units	(47)	(42)
Net cash provided by financing activities	7,685	25,231
Net increase (decrease) in cash and cash equivalents	(5,039)	8,261
Cash and cash equivalents, beginning of period	7,611	3,135
Cash and cash equivalents, end of period	2,572	11,396
Cash paid for income taxes	0	3
ASC 606 [Member]
Non-cash transactions
Deferred revenue reclassified to retained earnings - ASC 606 adoption	$ 0	$ 2,500

Business Description and Basis

Business Description and Basis of Presentation	9 Months Ended
	Sep. 30, 2019
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 191 total patents and pending applications, including 75 U.S. patents/patent applications and 116 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”), and 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.

Summary of Significant Accounti

Summary of Significant Accounting Policies	9 Months Ended
	Sep. 30, 2019
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, 2019, the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018, the Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2019 and 2018, the Condensed Consolidated Statements of Stockholders’ Equity for each of the three and nine months ended September 30, 2019 and 2018, and the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 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, 2019, our results of operations for the three and nine months ended September 30, 2019 and 2018, and our cash flows for the nine months ended September 30, 2019 and 2018. The results of operations for interim periods are not necessarily indicative of the results to be expected for a full year. 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, 2018, filed with the SEC on March 18, 2019. Use of Estimates We prepare our consolidated financial statements in accordance with U.S. GAAP. In doing so, we must 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. 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. 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. Leases The Company determines if an arrangement is a lease at inception in accordance with Accounting Standards Codification (“ASC”) Topic 842. Operating lease right-of-use (“ROU”) assets are included in other assets on the Condensed Consolidated Balance Sheet. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Revenue Recognition Most of our revenue is derived from licensing and royalty fees from contracts with customers which often span several years. We account for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. 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 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. On January 1, 2018, we adopted Topic 606 and applied the modified retrospective approach. Earnings (Loss) Per Share Basic earnings (loss) per share are computed by dividing earnings (loss) 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, 2019 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. Other Assets Other assets at September 30, 2019 include a right-of-use asset related to a facility lease for corporate promotional and marketing purposes. The facility lease was paid in full at inception and the ROU asset is being amortized over the remaining term of the lease. Other assets also include an ROU asset related to our office operating lease which expires in October 2019, and had subsequently been extended to October 2021 (See Note 8). 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 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. 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, 2019, and December 31, 2018. September 30, 2019 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Investments Available for Sale Cash $ 1,756 $ — $ — $ 1,756 $ 1,756 $ — Level 1: Mutual funds 624 — — 624 624 — U.S. agency securities 2,811 2 — 2,813 192 2,621 Total investments 3,435 2 — 3,437 816 2,621 Total $ 5,191 $ 2 $ — $ 5,193 $ 2,572 $ 2,621 December 31, 2018 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Investments Available for Sale Cash $ 5,048 $ — $ — $ 5,048 $ 5,048 $ — Level 1: Mutual funds 1,107 — — 1,107 1,107 — U.S. agency securities 3,259 — — 3,259 1,456 1,803 Total investments 4,366 — — 4,366 2,563 1,803 Total $ 9,414 $ — $ — $ 9,414 $ 7,611 $ 1,803 New Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 will adopt ASU 2016-13 effective January 1, 2020 with any cumulative effect of adoption recorded as an adjustment to retained earnings. The effect on our consolidated financial statements will largely depend on the composition and credit' quality of our investment portfolio and the economic conditions and forecasts at the time of adoption. Based on the current composition of our investment portfolio, current market conditions, and historical credit loss activity, the impact on our consolidated financial statements and related disclosures is not expected to be material. In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842) as amended and supplemented by subsequent ASU’s, (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize ROU assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. 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 adopted this ASU on January 1, 2019 which had no impact on our condensed consolidated statements of operations or cash flow (See Note 8 for impact on our Condensed Consolidated Balance Sheets).

Income Taxes

Income Taxes	9 Months Ended
	Sep. 30, 2019
Income Taxes [Abstract]
Income Taxes	Note 3 - Income Taxes We had an income tax benefit of $393 for the nine months ended September 30, 2019, due to a release of a state reserve as the statute of limitation for the tax return expired during the year. We had an income tax expense of ($5) for the same period in 2018.We had income tax expense of $0 for the three months ended September 30, 2019 and 2018. During the three and nine-month periods ended September 30, 2019 and 2018, 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. 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 September 30, 2019 will not be fully realizable. Accordingly, management has maintained a full valuation allowance against its net deferred tax assets at September 30, 2019. The valuation allowance carried against our net deferred tax assets was approximately $37,000 at September 30, 2019 and $36,000 at December 31, 2018. As of September 30, 2019, we have federal and state net operating loss carryforwards of approximately $127,000 and $108,000, respectively, expiring beginning in 2027 and 2028, respectively. Our policy is to recognize interest and penalties accrued on uncertain tax positions as a component of income tax expense.

Commitments and Related Party T

Commitments and Related Party Transactions	9 Months Ended
	Sep. 30, 2019
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 which expires in October 2019, and has subsequently been extended to October 2021 (see Note 8). We entered into a service agreement for the use of an aircraft from K2 Investment Fund LLC (“LLC”) for business travel for employees of the Company. We incurred approximately $442 and $1,327 compared to $579 and $1,262 in rental fees and reimbursements to the LLC during the three and nine months ended September 30, 2019 and 2018, respectively. We pay for the Company’s usage of the aircraft and have no rights to purchase. Our Chief Executive Officer and Chief Administrative Officer are the managing partners of the LLC and control the equity interests of the LLC. We entered into a 12-month non-exclusive agreement with the 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 the LLC with 30 days’ notice. The agreement renews on an annual basis unless terminated by either party. Neither party has exercised their termination rights.

Stock-Based Compensation

Stock-Based Compensation	9 Months Ended
	Sep. 30, 2019
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 April 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 September 30, 2019, 1,128,903 shares remained available for grant under the Plan. During the three months ended September 30, 2019, we did not grant any options. During the three months ended September 30, 2018, we granted options totaling 85,000 shares with a weighted average grant date fair value of $3.16. During the nine months ended September 30, 2019, we granted options for a total of 345,000 shares. The weighted average fair value at the grant dates for options issued during the nine months ended September 30, 2019 was $4.63 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, 2019 (i) dividend yield on our common stock of 0 percent (ii) expected stock price volatility of 92 percent (iii) a risk-free interest rate of 2.09 percent and (iv) an expected option term of 6 years. During the nine months ended September 30, 2018, we granted options for a total of 1,095,000 shares with a weighted average grant date fair value of $2.58. 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, 2018 (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 2.73 percent and (iv) an expected option term of 6 years. During the three months ended September 30, 2019 and 2018, we did not grant any RSUs. During the nine months ended September 30, 2019 and 2018, we granted 229,996 and 243,997 RSUs, respectively. The weighted average fair values at the grant dates for RSUs issued during the nine months ended September 30, 2019 and 2018 were $6.06 and $3.26 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 nine months ended September 30, 2019 and 2018, we paid $47 and $42 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 condensed consolidated statements of cash flows. Stock-based compensation expense included in general and administrative expense was $565 and $1,437 and in research and development expense was $434 and $1,275 for the three and nine months ended September 30, 2019, respectively, and $592 and $1,447 for general and administrative expense and $425 and $1,580 for research and development expense for the three and nine months ended September 30, 2018, respectively. As of September 30, 2019, the unrecognized stock-based compensation expense related to non-vested stock options and RSUs was $5,542 and $2,139, respectively, which will be amortized over an estimated weighted average period of approximately 2.31 and 2.59 years, respectively.

Equity

Equity	9 Months Ended
	Sep. 30, 2019
Equity [Abstract]
Equity	Note 6 — Equity Common Stock On July 30, 2018 we filed a $100,000 universal shelf registration statement on SEC Form S-3 which was declared effective by the SEC on August 16, 2018. We also entered an at-the-market equity offering sales agreement (“ATM”) with Cowen & Company, LLC on August 31, 2018, under which we can offer and sell shares of our common stock having an aggregate value of up to $50,000. We use the ATM proceeds for GABRIEL product development, marketing and general corporate purposes, which may include working capital, capital expenditures, other corporate expenses and acquisitions of complementary products, technologies or businesses. As of September 30, 2019, common stock with an aggregate value of up to $30,327 remained available for offer and sale under the ATM agreement. During the three months ended September 30, 2019, we sold 203,754 shares under the ATM. The average sales price per common share was $6.17 and the aggregate proceeds from the sales totaled $1,257 during the period. Sales commissions, fees and other costs associated with the ATM totaled $38. During the nine months ended September 30, 2019, we sold 1,232,020 shares under the ATM. The average sales price per common share was $5.79 and the aggregate proceeds from the sales totaled $7,131 during the period. Sales commissions, fees and other costs associated with the ATM totaled $214. Warrants In 2015 we issued warrants for the purchase of 25,000 shares of common stock at an exercise price of $7 per share, which expire in April 2020. Information about warrants outstanding as of September 30, 2019 is as follows: Original Number of Warrants Issued Exercise Price per Common Share Exercisable at December 31, 2018 Became Exercisable Exercised Terminated / Cancelled / Expired Exercisable at September 30, 2019 Expiration Date 25,000 $ 7.00 25,000 — — — 25,000 April 2020 25,000 — — — 25,000

Litigation

Litigation	9 Months Ended
	Sep. 30, 2019
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”) 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”) 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 Case No. 19-1050 - VirnetX Inc. v. Apple Inc VirnetX Inc. v. Apple Inc (USCAFC Case 19-1050) (“Apple II Appeal”). VirnetX Inc. v. The Mangrove Partners (USCAFC Case 17-1368) (“Consolidated Appeal”) On April 11, 2018, the USCAFC in an order designated the following appeals as companion cases and assigned to the same merits panel; • 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 and one of them involves Black Swamp IP, LLC. Oral arguments in this case were argued on January 8, 2019. On July 8, 2019, the USCAFC issued its opinion vacating and remanding both decisions. The court agreed with us that the PTAB misconstrued the patent claims, that many of the PTAB’s invalidity findings lacked substantial evidence, and that the PTAB Board abused its discretion in denying us the opportunity to file a motion for additional discovery as to the real party-in-interest issues. The underlying inter partes review (“IPR”) proceedings are currently pending before the PTAB. • VirnetX Inc. v. Cisco Systems, Inc. (USCAFC Case 18-1197-CB) (Appeal of Apple I Case) On October 27, 2017, Apple appealed the Final Judgment entered on September 29, 2017 to the USCAFC. Oral arguments in this case were held on January 8, 2019. On January 15, 2019 the Court issued a Rule 36 order affirming the District Court Judgement. Apple filed a request for panel rehearing and rehearing en-banc in this matter on February 21, 2019. On March 12, 2019, the Court invited us to respond to Apple’s petition on or before March 26, 2019. We filed our response on March 22, 2019. On July 1, 2019 Apple filed a motion for leave to file a supplemental brief regarding the impact of the USCAFC’s decision in VirnetX Inc. v. Cisco Systems, Inc. (USCAFC Case 18-1751) • 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 . On July 1, 2019 Apple filed a motion for leave to file a supplemental brief regarding the impact of the USCAFC’s decision in VirnetX Inc. v. Cisco Systems, Inc. (USCAFC Case 18-1751) On August 1, 2019, the USCAFC issued an opinion in this case agreeing with us that the PTAB could not maintain two of those reexaminations (initiated by Apple) with respect to claims as to which there has been a prior “final decision” on patent validity entered by a federal court. The court instructed PTAB to terminate those reexamination proceedings with respect to claims 1-35 of the ‘504 patent and claims 36-59 of the ‘211 patent. The court affirmed PTAB’s invalidity findings with respect to the remaining patent claims. Apple filed a request for panel rehearing and rehearing en-banc in this matter on August 26, 2019. We filed a separate request for panel rehearing on September 3, 2019. Our request was denied on September 19, 2019, and Apple’s request was denied on October 11, 2019. VirnetX Inc. v. Apple Inc (USCAFC Case 19-1050) (“Apple II Appeal”) On January 24, 2019 Apple filed its opening brief. We filed our response brief on March 1, 2019. Apple filed its reply brief on April 5, 2019. The oral arguments were heard on October 4, 2019. A decision by the USCAFC has not yet been issued. VirnetX Inc. v. Apple Inc. (USCAFC 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. On December 10, 2018, the USCAFC issued an opinion affirming the PTAB’s invalidity findings. VirnetX Inc. (USCAFC 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. On October 25, 2019, we and the USPTO filed a joint request that the deadline to inform the USCAFC how these appeals should proceed be extended until November 1, 2019. VirnetX Inc. v. Cisco Systems, Inc. (USCAFC Case 18-1751) On March 30, 2018, we filed with the USCAFC an appeal of the invalidity findings by the PTAB in inter-partes reexamination no. 95/001,851 involving our U.S. Patent No. 7,418,504. Oral arguments in this case were held on June 4, 2019. On June 28, 2019, the USCAFC issued its opinion vacating the PTAB’s invalidity findings with respect to claims 5, 12, and 13 and remanding to the PTAB for further proceedings. The court affirmed the PTAB’s invalidity findings with respect to the remaining patent claims. Cisco filed a request for panel rehearing and rehearing en-banc in this matter on August 12, 2019. Cisco’s request was denied on October 1, 2019. VirnetX Inc. v. Cisco Systems, Inc. (USCAFC Case 19-1043) On October 1, 2018, we filed with the USCAFC an appeal of the invalidity findings by the PTAB in inter-partes reexamination no. 95/001,746 involving our U.S. Patent No. 6,839,759. We filed our opening brief on March 15, 2019. Cisco filed its response brief on June 19, 2019. We filed our reply brief on August 14, 2019. Cisco filed a motion to submit a sur-reply brief on August 26, 2019, which we opposed. On September 27, 2019, the USCAFC issued an order deferring resolution of Cisco’s motion for the merits panel. The oral arguments have not yet been scheduled. VirnetX Inc. v. Cisco Systems, Inc. (USCAFC Case 19-1671) On March 18, 2018, we filed with the USCAFC an appeal of the invalidity findings by the PTAB in inter-partes reexamination no. 95/001,679 involving our U.S. Patent No. 6,502,135. We filed a motion to remand on August 23, 2019, which the USCAFC denied on October 1, 2019, directing the parties to address the issues in the merits briefs. Our opening brief is currently due on November 12, 2019. VirnetX Inc. v. Cisco Systems, Inc. (USCAFC Case 19-1725) On March 29, 2019, we filed with the USCAFC an appeal of the invalidity findings by the PTAB in inter-partes reexamination no. 95/001,792 involving our U.S. Patent No. 7,188,180. We filed a motion to remand on September 10, 2019, which remains pending. 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.

Leases

Leases	9 Months Ended
	Sep. 30, 2019
Leases [Abstract]
Leases	Note 8 — Leases We determine if an arrangement is a lease at inception. Operating lease ROU assets are included in other assets on the Condensed Consolidated Balance Sheet as of September 30, 2019. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. We lease office space under an operating lease which initially expired in October 2019. On October 31, 2019, we executed a two-year extension to the lease, extending existing rates through October 31, 2021. Our extended office lease continues as an operating lease. We also entered an operating lease for a facility used for corporate promotional and marketing purposes which was prepaid in full in a prior year and expires in 2024. As described under New Accounting Pronouncements above, we adopted ASU 2016-02 effective January 1, 2019. As a result of the adoption, on January 1, 2019 we reclassified $385 of prepaid lease payments for the promotional and marketing facility from current assets to non-current assets. At January 1, 2019 we recorded an ROU asset and lease liability of $45 for the office lease with a balance of $4 at September 30, 2019. On October 31, 2019, the lease extension date, we increased our ROU and lease liability by $111, of which $9 is due in 2019, $56 is due in 2020, and $46 is due in 2021. For the three and nine months ended September 30, 2019, we recorded lease expense of $14 and $41, respectively. Adoption of the ASU had no impact on the Condensed Consolidated Statement of Operations.

Subsequent Events

Subsequent Events	9 Months Ended
	Sep. 30, 2019
Subsequent Events [Abstract]
Subsequent Events	Note 9 — Subsequent Events Between October 1, 2019 and November 6, 2019, we sold 551,795 shares of common stock under the ATM program. The average sales price per common share sold was $6.09 and the aggregate proceeds from the sales totaled $3,360. Sales commissions, fees and other costs associated with these ATM transactions totaled $101.

Summary of Significant Accoun_2

Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2019
Summary of Significant Accounting Policies [Abstract]
Unaudited Interim Financial Information	Unaudited Interim Financial Information The accompanying Condensed Consolidated Balance Sheet as of September 30, 2019, the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018, the Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2019 and 2018, the Condensed Consolidated Statements of Stockholders’ Equity for each of the three and nine months ended September 30, 2019 and 2018, and the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 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, 2019, our results of operations for the three and nine months ended September 30, 2019 and 2018, and our cash flows for the nine months ended September 30, 2019 and 2018. The results of operations for interim periods are not necessarily indicative of the results to be expected for a full year. 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, 2018, filed with the SEC on March 18, 2019.
Use of Estimates	Use of Estimates We prepare our consolidated financial statements in accordance with U.S. GAAP. In doing so, we must 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.
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.
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.
Leases	Leases The Company determines if an arrangement is a lease at inception in accordance with Accounting Standards Codification (“ASC”) Topic 842. Operating lease right-of-use (“ROU”) assets are included in other assets on the Condensed Consolidated Balance Sheet. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.
Revenue Recognition	Revenue Recognition Most of our revenue is derived from licensing and royalty fees from contracts with customers which often span several years. We account for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. 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 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. On January 1, 2018, we adopted Topic 606 and applied the modified retrospective approach.
Earnings (Loss) Per Share	Earnings (Loss) Per Share Basic earnings (loss) per share are computed by dividing earnings (loss) 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, 2019 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.
Other Assets	Other Assets Other assets at September 30, 2019 include a right-of-use asset related to a facility lease for corporate promotional and marketing purposes. The facility lease was paid in full at inception and the ROU asset is being amortized over the remaining term of the lease. Other assets also include an ROU asset related to our office operating lease which expires in October 2019, and had subsequently been extended to October 2021 (See Note 8).
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 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. 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, 2019, and December 31, 2018. September 30, 2019 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Investments Available for Sale Cash $ 1,756 $ — $ — $ 1,756 $ 1,756 $ — Level 1: Mutual funds 624 — — 624 624 — U.S. agency securities 2,811 2 — 2,813 192 2,621 Total investments 3,435 2 — 3,437 816 2,621 Total $ 5,191 $ 2 $ — $ 5,193 $ 2,572 $ 2,621 December 31, 2018 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Investments Available for Sale Cash $ 5,048 $ — $ — $ 5,048 $ 5,048 $ — Level 1: Mutual funds 1,107 — — 1,107 1,107 — U.S. agency securities 3,259 — — 3,259 1,456 1,803 Total investments 4,366 — — 4,366 2,563 1,803 Total $ 9,414 $ — $ — $ 9,414 $ 7,611 $ 1,803
New Accounting Pronouncements	New Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 will adopt ASU 2016-13 effective January 1, 2020 with any cumulative effect of adoption recorded as an adjustment to retained earnings. The effect on our consolidated financial statements will largely depend on the composition and credit' quality of our investment portfolio and the economic conditions and forecasts at the time of adoption. Based on the current composition of our investment portfolio, current market conditions, and historical credit loss activity, the impact on our consolidated financial statements and related disclosures is not expected to be material. In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842) as amended and supplemented by subsequent ASU’s, (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize ROU assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. 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 adopted this ASU on January 1, 2019 which had no impact on our condensed consolidated statements of operations or cash flow (See Note 8 for impact on our Condensed Consolidated Balance Sheets).

Summary of Significant Accoun_3

Summary of Significant Accounting Policies (Tables)	9 Months Ended
	Sep. 30, 2019
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 September 30, 2019, and December 31, 2018. September 30, 2019 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Investments Available for Sale Cash $ 1,756 $ — $ — $ 1,756 $ 1,756 $ — Level 1: Mutual funds 624 — — 624 624 — U.S. agency securities 2,811 2 — 2,813 192 2,621 Total investments 3,435 2 — 3,437 816 2,621 Total $ 5,191 $ 2 $ — $ 5,193 $ 2,572 $ 2,621 December 31, 2018 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Investments Available for Sale Cash $ 5,048 $ — $ — $ 5,048 $ 5,048 $ — Level 1: Mutual funds 1,107 — — 1,107 1,107 — U.S. agency securities 3,259 — — 3,259 1,456 1,803 Total investments 4,366 — — 4,366 2,563 1,803 Total $ 9,414 $ — $ — $ 9,414 $ 7,611 $ 1,803

Equity (Tables)

Equity (Tables)	9 Months Ended
	Sep. 30, 2019
Equity [Abstract]
Information about Warrants Outstanding	Information about warrants outstanding as of September 30, 2019 is as follows: Original Number of Warrants Issued Exercise Price per Common Share Exercisable at December 31, 2018 Became Exercisable Exercised Terminated / Cancelled / Expired Exercisable at September 30, 2019 Expiration Date 25,000 $ 7.00 25,000 — — — 25,000 April 2020 25,000 — — — 25,000

Business Description and Basi_2

Business Description and Basis of Presentation (Details) - Patents [Member]	Sep. 30, 2019Patent
Business Description [Abstract]
Number of patents and pending applications	191
U.S. [Member]
Business Description [Abstract]
Number of patents and pending applications	75
Foreign [Member]
Business Description [Abstract]
Number of patents and pending applications	116

Summary of Significant Accoun_4

Summary of Significant Accounting Policies (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2019USD ($)Institution	Dec. 31, 2018USD ($)
Concentration of Credit Risk and Others Risks and Uncertainties [Abstract]
Number of financial institutions holding company's cash | Institution	2
Cash and available-for-sale securities adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category [Abstract]
Adjusted Cost	$ 2,572	$ 7,611
Adjusted Cost	3,435	4,366
Unrealized Gains	2	0
Unrealized Losses	0	0
Fair Value	3,437	4,366
Adjusted Cost	5,191	9,414
Fair Value	5,193	9,414
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	1,756	5,048
Fair Value	1,756	5,048
Cash and Cash Equivalents	1,756	5,048
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	624	1,107
Unrealized Gains	0	0
Unrealized Losses	0	0
Fair Value	624	1,107
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	2,811	3,259
Unrealized Gains	2	0
Unrealized Losses	0	0
Fair Value	2,813	3,259
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	2,572	7,611
Cash and Cash Equivalents	2,572	7,611
Investments Available for Sale	2,621	1,803
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	1,756	5,048
Cash and Cash Equivalents	1,756	5,048
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	816	2,563
Cash and Cash Equivalents	816	2,563
Investments Available for Sale	2,621	1,803
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	624	1,107
Cash and Cash Equivalents	624	1,107
Investments Available for Sale	0	0
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	192	1,456
Cash and Cash Equivalents	192	1,456
Investments Available for Sale	2,621	$ 1,803
2013 to 2016 [Member]
Deferred Revenue [Abstract]
Total contractual payments received	$ 10,000

Income Taxes (Details)

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Income Taxes [Abstract]
Income tax (benefit) expense	$ 0	$ 0	$ (393)	$ 5
Valuation allowance carried against net deferred tax assets	37,000		37,000		$ 36,000
Federal [Member]
Income Taxes [Abstract]
Net operating loss carryforwards	127,000		$ 127,000
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	$ 108,000		$ 108,000
State [Member] | Earliest Tax Year [Member]
Income Taxes [Abstract]
Operating loss carryforwards, expiration dates			Dec. 31, 2028

Commitments and Related Party_2

Commitments and Related Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Offices [Member]
Office and Aircraft Leases [Abstract]
Operating lease expiration date			Oct. 31, 2021
K2 Investment Fund LLC [Member] | Aircraft [Member]
Office and Aircraft Leases [Abstract]
Rental fees incurred for use of aircraft	$ 442	$ 579	$ 1,327	$ 1,262
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		9 Months Ended
	Apr. 30, 2017	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Share-based Compensation [Abstract]
Withholding taxes paid on shares issued upon conversion of RSUs				$ 47	$ 42
Stock-based compensation expense				2,712	3,026
Selling, General and Administrative Expense [Member]
Share-based Compensation [Abstract]
Stock-based compensation expense		$ 565	$ 592	1,437	1,447
Research and Development Expense [Member]
Share-based Compensation [Abstract]
Stock-based compensation expense		$ 434	$ 425	$ 1,275	$ 1,580
Stock Options [Member]
Share-based Compensation [Abstract]
Options granted (in shares)		0	85,000	345,000	1,095,000
Options granted, weighted average grant date fair value (in dollars per share)			$ 3.16	$ 4.63	$ 2.58
Dividend yield				0.00%	0.00%
Expected stock price volatility				92.00%	84.00%
Risk-free interest rate				2.09%	2.73%
Expected option term				6 years	6 years
Unrecognized stock-based compensation expense expected to be recognized related to non-vested stock options		$ 5,542		$ 5,542
Weighted average amortization period				2 years 3 months 22 days
Restricted Stock Units (RSUs) [Member]
Share-based Compensation [Abstract]
RSUs granted (in shares)		0	0	229,996	243,997
Weighted average grant date fair value of RSU's granted (in dollars per share)				$ 6.06	$ 3.26
Withholding taxes paid on shares issued upon conversion of RSUs				$ 47	$ 42
Unrecognized stock-based compensation expense expected to be recognized related to non-vested RSUs		$ 2,139		$ 2,139
Weighted average amortization period				2 years 7 months 2 days
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)		1,128,903		1,128,903

Equity, Common Stock (Details)

Equity, Common Stock (Details) - Common Stock [Member] - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2019	Aug. 31, 2018	Jul. 30, 2018
Common Stock [Abstract]
Number of shares of common stock sold (in shares)	203,754	467,928	560,338	4,083,377	1,320,921	1,751,689
Universal Shelf Registration Statement [Member] | Maximum [Member]
Common Stock [Abstract]
Securities offered for sale, aggregate value									$ 100,000
ATM Agreement [Member]
Common Stock [Abstract]
Number of shares of common stock sold (in shares)	203,754						1,232,020
Average sales price per common share (in dollars per share)	$ 6.17						$ 5.79
Aggregate proceeds from sales of common stock	$ 1,257						$ 7,131
Sales commissions, fees and other costs associated with issuance of common stock	38						214
ATM Agreement [Member] | Maximum [Member]
Common Stock [Abstract]
Securities offered for sale, aggregate value	$ 30,327						$ 30,327	$ 50,000

Equity, Warrants (Details)

Equity, Warrants (Details) - Warrants [Member]	9 Months Ended
	Sep. 30, 2019$ / 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]	Sep. 20, 2018USD ($)	Aug. 31, 2018USD ($)	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
Costs, fees and 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	$ 595,900,000	$ 502,600,000
Royalty rate per device used in calculating infringement damages		$ 1.20
Additional amount granted in agreed bill of costs, attorney fees, and prejudgment interest	$ 93,300,000

Leases (Details)

Leases (Details) - USD ($) $ in Thousands	Oct. 31, 2019	Sep. 30, 2019	Sep. 30, 2019	Dec. 31, 2018
Lessee Description [Abstract]
ROU asset		$ 4	$ 4	$ 45
Lease liability		4	4	45
Lease expense		$ 14	$ 41
Current Assets [Member]
Lessee Description [Abstract]
Prepaid lease payments for promotional and marketing facility				385
Subsequent Event [Member] | Office Space Lease Extension [Member]
Lessee Description [Abstract]
Lease extension period	2 years
ROU asset	$ 111
Lease liability	111
2019	9
2020	56
2021	$ 46
ASU 2016-02 [Member] | Noncurrent Assets [Member]
Lessee Description [Abstract]
Prepaid lease payments for promotional and marketing facility				$ 385

Subsequent Events (Details)

Subsequent Events (Details) - Common Stock [Member] - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended						9 Months Ended
	Nov. 06, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2019
Stock Transactions [Abstract]
Number of shares of common stock sold (in shares)		203,754	467,928	560,338	4,083,377	1,320,921	1,751,689
ATM Agreement [Member]
Stock Transactions [Abstract]
Number of shares of common stock sold (in shares)		203,754						1,232,020
Average sales price per common share (in dollars per share)		$ 6.17						$ 5.79
Aggregate proceeds from sales of common stock		$ 1,257						$ 7,131
Sales commissions, fees and other costs associated with issuance of common stock		$ 38						$ 214
Subsequent Event [Member] | ATM Agreement [Member]
Stock Transactions [Abstract]
Number of shares of common stock sold (in shares)	551,795
Average sales price per common share (in dollars per share)	$ 6.09
Aggregate proceeds from sales of common stock	$ 3,360
Sales commissions, fees and other costs associated with issuance of common stock	$ 101