Stock Based Compensation

6 Months Ended

Jun. 30, 2022

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 “2013 Plan”), which has been approved by our stockholders. To the extent that any award should expire, become un-exercisable or is otherwise forfeited, the shares subject to such award will again become available for issuance under the 2013 Plan. The 2013 Plan provides for the granting of stock options and restricted stock units purchase rights (“RSUs”) to our employees and consultants. Stock options granted under the 2013 Plan may be incentive stock options or nonqualified stock options. Incentive stock options (“ISOs”) may only be granted to our employees (including officers and directors). Nonqualified stock options (“NSOs”) and stock purchase rights may be granted to our employees and consultants. The 2013 Plan expires in 2023.

Options may be granted under the 2013 Plan with an exercise price determined by our Board of Directors, or a duly appointed committee thereof, provided, however, that the exercise price of an option granted to any employee shall be not less than 100% of the fair market value at the date of grant in the case of ISOs or 85% of the fair market value at the date of grant in the case of an NSO. The exercise price of an ISO or NSO granted to one of our Named Executive Officers shall not be less than 100% of the fair market value of the shares at the date of grant and the exercise price of an ISO granted to a 10% shareholder shall not be less than 110% of the fair market value of the shares on the date of grant. Stock options granted under the 2013 Plan typically vest over four years and have a 10-year term. All RSUs are considered to be granted at the fair value of our stock on the date of grant because they have no exercise price. RSUs typically vest over four years. As of June 30, 2022, there were 1,435,929 shares available for grant under the 2013 Plan.

Stock-based compensation expense included in general and administrative expense was $487 and $463, and in research and development expense was $325 and $511, for the three months ended June 30, 2022 and 2021, respectively. Stock-based compensation expense included in general and administrative expense was $953 and $846, and in research and development expense was $637 and $1,007, for the six months ended June 30, 2022 and 2021, respectively.

During the three months ended June 30, 2022, we granted options for a total of 801,004 shares with a weighted average grant date fair value of $1.18 per option. During the three months ended June 30, 2021, we granted options for a total of 779,500 shares with a weighted average grant date fair value of $3.45 per option.

During the six months ended June 30, 2022, we granted options for a total of 801,004 shares with a weighted average grant date fair value of $1.18 per option. We estimated the fair value of the options on the date of grant utilizing the Black-Scholes valuation model with the following assumptions: (i) 0 percent dividend yield, (ii) 86 percent volatility, (iii) 3 percent risk free rate and (iv) 6 years expected term. During the six months ended June 30, 2021, we granted options for a total of 779,500 shares with a weighted average grant date fair value of $3.45 per option. We estimated the fair value of the options on the date of grant utilizing the Black-Scholes valuation model with the following assumptions: (i) 0 percent dividend yield, (ii) 91 percent volatility, (iii) 1 percent risk free rate and (iv) 6 years expected term.

During the three months ended June 30, 2022 and 2021, we granted 258,363 and 236,661 RSUs respectively, with weighted average fair values at the date of grant of $1.46 and $4.61, 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, 2022 and 2021, we paid $29 and $196 in withholding taxes on shares issued upon conversion of RSUs, respectively. The underlying shares were cancelled. The amounts are reflected as financing costs in the accompanying statement of cash flows. No RSUs were granted during the first three months of 2022 or 2021.

As of June 30, 2022, the unrecognized stock-based compensation expense related to non-vested stock options and RSUs was $5,242 and $1,988, respectively, which will be amortized over an estimated weighted average period of approximately 3.02 and 2.93 years, respectively.

During the three and six months ended June 30, 2022, and 2021 no options were exercised.

During the three months ended June 30, 2022 and 2021, we issued 191,795 and 174,285 shares as a result of vesting RSUs, respectively. No shares were issued during the first three months of 2022 or 2021 as a result of vesting RSUs.

During the three and six months ended June 30, 2022 and 2021, there were 255,000 and 390,000 options returned to the plan due to the 10-year expiration for unexercised options respectively.