Company: VHC
Filing Date: 2025-11-14
Form Type: 10-Q
Source: 0001140361-25-042294
Chunk: 14

Company: VirnetX Holding Corp
Filing Date: 2025-11-14
Form: 10-Q
Item: Part I, Item 1
Chunk 14
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 three to 15 years, on either a straight-line basis or as revenue is generated by the assets.

      Impairment of Long-Lived Assets

      We identify and record impairment losses on long-lived assets used in operations when events and changes in circumstances indicate that the carrying amount of an asset might not be recoverable, but
        not less than annually. Recoverability is measured by comparison of the anticipated future net undiscounted cash flows to the related assets’ carrying value. If such assets are deemed 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.

      Research and Development

      Research and development costs include expenses paid to outside development consultants and compensation related expenses for our engineering staff. Research and development costs are expensed as
        incurred.

        8

Income Taxes

      We account for income taxes using the asset and liability method. The asset and liability method requires the recognition of deferred tax assets and liabilities for expected future tax consequences of
        temporary differences that currently exist between the tax basis and financial reporting basis of our assets and liabilities. We calculate current and deferred tax provisions based on estimates and assumptions that could differ from actual results
        reflected on the income tax returns filed during the following years. Adjustments based on filed returns are recorded when identified in the subsequent years. The effect on deferred taxes for a change in tax rates is recognized in income in the
        period that the tax rate change is enacted. In assessing our deferred tax assets, we consider whether it is more likely than not that all or some portion of the deferred tax assets will not be realized.

      On July 4, 2025, the United States enacted tax legislation, often referred to as the “One Big Beautiful Bill” Act (OB3). Management is evaluating the impact of OB3 to the Company and cannot yet
        estimate what elections it will make related to accelerating pre-2025 IRC Section 174 domestic capitalized R&D costs or federal bonus depreciation elections for fixed assets placed in service on or after January 19, 2025. We will continue to
        monitor and assess options.

      A valuation allowance is provided for deferred income tax assets when, in our judgment, based upon currently available information and other factors, it is more likely than not that all or a portion
        of such deferred income tax assets will not be realized. The determination of the need for a valuation allowance is based on an on-going evaluation