VirnetX Holding (VHC) risk factors, FY2024 10-K

Risks Related to Our Business and Our Financial Reporting

1. 01Our operating results may not be consistent and may be difficult to predict and we may not be able to achieve or sustain profitability in the future
2. 02Government export and import control regulations on selling products with encryption technology in certain international markets
3. 03Our success depends in part on establishing and maintaining relationships with third parties to incorporate our products and services into their operations
4. 04We expect that we will experience long and unpredictable sales cycles, which may impact our operating results
5. 05We have limited technical resources and are at an early stage in commercialization of our VirnetX One™ platform and software products
6. 06Protect our products from any system failures or other breaches
7. 07The market in which we participate is intensely competitive, and if we do not compete effectively, our operating results could be harmed
8. 08Our products are highly technical and may contain undetected errors, which could cause harm to our reputation and adversely affect our business
9. 09Malfunctions of third-party communications infrastructure, hardware and software expose us to a variety of risks that we cannot control
10. 10System failure or interruption or our failure to meet increasing demands on our systems could harm our business
11. 11Physical or electronic break-ins, sabotage, intentional acts of vandalism, terrorist attacks and other events beyond our control
12. 12If we are not able to adequately protect our patent rights and trade secrets, our business would be negatively impacted
13. 13If we experience security breaches or incidents, we could be exposed to liability and our reputation and business could suffer
14. 14Our products are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets
15. 15Privacy and data security concerns, data collection and transfer restrictions and related domestic or foreign regulations may limit the use and adoption of our solutions and adversely affect our business
16. 16Our business has been, and may continue to be, negatively affected by activist shareholders

Risks Related to Ownership of Our Common Stock

1. 17We do not regularly pay dividends on our common stock and thus stockholders must look to appreciation of our common stock to realize a gain on their investments
2. 18Investors may have limited influence because ownership of our common stock is limited
3. 19Our protective provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make it difficult for a third party to successfully acquire us even if you would like to sell your stock to them
4. 20A staggered Board of Directors: Only one or two of five directors will be up for election at any given annual meeting, delaying the ability of stockholders to affect a change in control of us because it would take two annual meetings to effectively replace a majority of the Board of Directors
5. 21Super majority requirement for stockholder amendments to the Restated Bylaws: Stockholder proposals to alter or amend our Restated Bylaws or to adopt new bylaws can only be approved by the affirmative vote of at least 66 2/3% of the outstanding shares of our common stock
6. 22In addition, the provisions of Section 203 of the Delaware General Corporation Law govern us. These provisions may prohibit large stockholders, particularly those owning 15% or more of our outstanding voting stock, from merging or combining with us for a certain period of time
7. 23Our Restated Bylaws designate a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, or employees
8. 24However, notwithstanding the exclusive forum provisions, our Restated Bylaws explicitly state that they would not preclude the filing of claims brought to enforce any liability or duty created under federal securities laws, including the Securities Act or the Exchange Act
9. 25Failure to meet the NYSE’s continued listing requirements could result in the suspension of trading of our common stock and a subsequent delisting of our common stock
10. 26We may need to raise additional capital to support our business growth, and this capital may be dilutive, may cause our stock price to drop or may not be available on acceptable terms, if at all
11. 27The departure of Kendall Larsen, our Chief Executive Officer and President, and/or other key personnel could compromise our ability to execute our strategic plan and materially harm our business
12. 28We will need to recruit and retain additional qualified personnel to successfully grow our business
13. 29War, terrorism, other acts of violence, or natural or manmade disasters as well as macroeconomic conditions may affect the markets in which we operate, our clients and our service delivery
14. 30Trading in our common stock is limited and the price of our common shares may be subject to volatility
15. 31General social, political, economic, and financial conditions, including significant volatility in the global financial markets
16. 32We have broad discretion in how we apply our funds, and we may not use these funds effectively, which could affect our results of operations and cause our stock price to decline