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ORRICK,
HERRINGTON & SUTCLIFFE LLP
1000 Marsh Road
Menlo Park,
CA 94025
tel 650-614-7400
fax 650-614-7401
www.orrick.com
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December
9, 2009
Matthew
Crispino
Securities
and Exchange Commission (Mail Stop 4561)
100 F
Street, N.E.
Washington,
D.C. 20549
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Re:
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VirnetX
Holding Corporation (the “Company”)
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Amendment
No. 1 to the Registration Statement on Form S-3 (the “Registration
Statement”)
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Filed
September 25, 2009
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File
No. 333-162145
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Dear Mr.
Crispino,
Please
find, as set forth below, the Company’s responses to the comment letter of the
staff of the Securities and Exchange Commission (the “Staff”) dated
December 1, 2009 (the “Staff
Letter”). Concurrent with delivering this letter, the Company
has filed Amendment No. 2 to the Registration Statement on Form S-1 to Form
S-3 (the “Amendment No. 2”) on
EDGAR. For the Staff’s convenience, the Staff’s comments from the
Staff Letter are set forth in italics before each response and we have provided
a marked copy of Amendment No. 2 showing changes from the previously filed
version.
General
1. We
have considered your response to prior comment 2. However, in
accordance with Rule 12b-2 and related Staff guidance, you met the
definition of “accelerated filer” as of the end of your 2008 fiscal
year. Accordingly, you should have filed your 2008 Form 10-K by
March 16, 2009. Since you did not file your Form 10-K until
March 31, 2009, you are ineligible to use the Form S-3. See
General Instruction I.A.3(b) of Form S-3. Please file an amendment on
a registration form that you are eligible to use.
The
Company notes the Staff’s comments and has filed Amendment No. 2 on a
Registration Statement on Form S-1.
Selling Security Holders,
page 19
2
.. We refer to our prior
comment 4 and note your disclosure that Ramius Advisors, Ramius Enterprise, RCG
PB, Ltd and Vestal Venture Capital are affiliates of registered broker
dealers. Please tell us whether the shares held by these entities
were purchased in the ordinary course of business and whether, at the time of
purchase, the entities had any agreements or understanding, directly or
indirectly, with any other person to distribute the shares.
The
Company notes the Staff’s comments and has included affirmative statements in
the footnotes of Amendment No. 2 on pages 61 and 62 relating to Ramius
Enterprise, RCG PB, Ltd, and Vestal Venture Capital that the shares held by
these entities were purchased in the ordinary course of business and whether, at
the time of purchase, the entities had any agreements or understanding, directly
or indirectly with any other person to distribute the shares. We
respectfully note to the Staff that Ramius Advisors did not purchase any shares
in connection with the transaction, but in response to the Staff’s comment, we
have included language in the footnote on page 61 of the Amendment No. 2
that Ramius Advisors, at the time of purchase by Ramius Enterprise and RCG PB,
did not have any agreement or understanding, directly or indirectly, with any
other person to distribute the shares held by Ramius Advisors and RCG
PB.
December 9,
2009
VirnetX Holding
Corporation
Page 2
3. As
a related matter, please provide us with your analysis as to why you believe
Ramius Advisors LLC is not the beneficial owner of the shares held by Ramius
Enterprise and RCG PB Ltd. In this regard, we note that Ramius
Advisors, as investment manager, has voting control and investment discretion
over the shares held by Rarnius Enterprise and RCG PB Ltd. See
Exchange Act Rule 16a-1(a)(2).
As the
Staff is aware, Item 7 of Form S-1 requires the Company to furnish the
information required by Item 507 of Regulation S-K. As discussed
further in Question 140.02 under the SEC’s Regulation S-K Compliance and
Disclosure Interpretations, the Company must identify in a registration
statement the person or persons who have voting or investment control over the
Company’s securities that the entity owns. In that Question 140.02,
the staff goes on to submit that a company is to use Rule 13d-3 by analogy to
make the determination of who is to be included in the selling security holder
table. The Section 13(d) rules generally attribute beneficial ownership to
any person who has or shares voting or investment power over the issuer’s
securities.
In
accordance with the Staff’s comments to the Company dated October 23, 2009
regarding the Registration Statement, the Company included Ramius Advisors LLC
in the Registration Statement selling security holder table, because it has, as
the Staff notes, voting and investment discretion over the shares held by Ramius
Enterprise and RCG PB Ltd.
As the
Staff is aware, Rule 13d-4 of the Exchange Act provides that any person has the
right to expressly declare in any statement filed, that the filing of such
statement shall not be construed as an admission that such person is, for the
purposes of Section 13(d) or 13(g) of the Exchange Act, the beneficial owner of
any securities covered by the statement.
Once it
is determined that a person is a beneficial owner using the Section 13(d) rules,
a “pecuniary interest” test of beneficial ownership determines which securities
holdings and transactions must be reported and are subject to short-swing profit
liability. Under Exchange Act Rule 16a-1(a)(2), the term “beneficial
owner” shall mean any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares a direct or
indirect pecuniary interest in the equity securities.
Ramius
Advisors, LLC has advised the Company that it has disclaimed beneficial
ownership of the Company’s securities because Ramius Advisors, LLC does not have
or share a direct or indirect pecuniary interest in the shares held by RCG PB,
Ltd or Ramius Enterprise Master Fund Ltd. Accordingly, Ramius
Advisors has disclaimed beneficial ownership of the Company’s securities and the
Company has reflected this disclaimer in the footnotes to the selling security
holder table.
December 9,
2009
VirnetX Holding
Corporation
Page 3
Use of Proceeds,
page 17
4. We
refer to your revisions made in response to our prior comment
3. Please revise your disclosure to specify the approximate amount of
the proceeds you intend to use for the Microsoft litigation, commercialization
of your patented GABRIEL Connection Technology and your intellectual property
portfolio, and towards the establishment of the exclusive secure domain name
registry in the United States and other markets. See Item 504 of
Regulation S-K. Also, considering your statement that if you are
unsuccessful in the Microsoft litigation you may not survive, please revise your
disclosure to provide quantitative data regarding the deficiency in the amount
of anticipated proceeds from this offering that will require you to obtain funds
from additional sources.
The
Company respectfully notes the Staff’s comment and has revised the disclosure in
Amendment No. 2 on page 21 to discuss, in accordance with Item 504 of Regulation
S-K, (i) the approximate allocation of the proceeds between each purpose for
which the net proceeds to the Company from the securities to be offered are
intended to be used, and (ii) enhanced discussion of the Company’s liquidity
position and the fact that the Company’s cash and cash equivalents, a figure
which includes the proceeds generated from the initial sale of shares of the
Company’s common stock, are not currently sufficient to fund our operations
through April 2010.
***
Please
let us know if you have any questions on the foregoing.
Very
truly yours,
/s/ Lowell D. Ness
Lowell D.
Ness
Orrick,
Herrington & Sutcliffe LLP
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cc:
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Ryan
Houseal (U.S. Securities and Exchange
Commission)
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Kendall
Larsen (VirnetX Holding
Corporation)
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