SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
-------------------------
--- TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 0-21511
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V-ONE Corporation
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(Exact name of registrant as specified in its charter)
Delaware 52-1953278
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1803 Research Boulevard - Suite 305, Rockville, Maryland 20850
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 838-8900
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
--- ---
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at November 9, 1996
----- --------------------------------
Common Stock, $0.001 par value 12,540,556 shares
<PAGE>
PART I. Financial Information
Item 1. Financial Statements
<TABLE>
<CAPTION>
V-ONE CORPORATION
BALANCE SHEETS
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 964,761 $ 1,328,385
Accounts receivable, net of allowances of
$237,805 and $23,620 as of September 30, 1996 and
December 31, 1995 respectively 1,687,506 242,392
Inventory, less allowances
of $ 50,000 as of September 30, 1996 and
December 31, 1995 293,290 257,630
Prepaid expenses and other current assets 138,817 13,955
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Total current assets 3,084,374 1,842,362
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Property and equipment
Office and computer equipment 660,949 219,044
Furniture and fixtures 96,764 14,958
Less accumulated depreciation (91,653) (35,952)
----------- -------------
Net property and equipment 666,060 198,050
----------- -------------
Deferred financing costs 1,239,164 ---
Other assets 28,568 10,190
----------- -------------
Total assets $ 5,018,166 $ 2,050,602
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</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
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(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable and accrued expenses $ 1,986,115 $ 189,384
Accrued interest 56,216 38,161
Deferred income 25,095 12,500
Notes payable - current 16,668 1,255,556
Notes payable to related parties 1,601,800 474,144
Capital lease obligations - current 69,117 40,928
----------- ------------
Total current liabilities 3,755,011 2,010,673
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Notes payable - noncurrent 26,386 44,444
Deferred rent 96,338 52,959
Capital lease obligations - noncurrent 125,167 82,464
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Total liabilities 4,002,902 2,190,540
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Preferred Stock, $0.001 par value;
13,333,333 shares authorized; 0 and
791,011 shares issued and outstanding, as
of December 31, 1995 and September 30,
1996, respectively 3,559,554 ---
----------- ------------
Shareholders' equity (deficit):
Common Stock, $0.001 par value; 33,333,333 shares
authorized; 8,304,426 and 8,455,527 shares issued
and outstanding, as of December 31, 1995 and
September 30, 1996, respectively 8,456 8,304
Additional paid in capital 4,745,055 1,496,541
Notes receivable from sales of Common Stock (287,400) ---
Accumulated deficit (7,010,401) (1,644,783)
----------- -----------
Total shareholder's equity (deficit) (2,544,290) (139,938)
----------- -----------
Total liabilities and shareholders' equity $ 5,018,166 $ 2,050,602
============ ===========
(deficit)
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
<TABLE>
<CAPTION>
V-ONE CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- -----------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Products $ 1,578,620 $ 356,021 $ 3,862,664 $ 725,239
Consulting and services 141,923 --- 234,266 ---
----------- ------------ ----------- -----------
Total revenues 1,720,543 356,021 4,096,930 725,239
----------- ----------- ----------- -----------
Cost of revenues:
Products 503,484 125,482 1,276,813 256,632
Consulting and services 11,954 --- 39,176 ---
----------- ------------ ----------- -----------
Total cost of revenues 515,438 125,482 1,315,989 256,632
----------- ----------- ----------- -----------
Gross profit 1,205,105 230,539 2,780,941 468,607
----------- ----------- ----------- -----------
Operating expenses:
Sales and marketing 898,543 24,030 2,570,981 90,072
General and
administrative 507,079 176,903 3,856,594 638,066
Research and development 607,305 90,142 1,311,613 200,932
----------- ---------- ----------- -----------
Total operating expenses 2,012,927 291,075 7,739,188 929,070
----------- ---------- ----------- -----------
Operating loss (807,822) (60,536) (4,958,247) (460,463)
----------- ---------- ----------- -----------
Other (expense) income:
Interest expense (191,723) --- (472,749) ---
Interest income 22,031 --- 65,418 ---
----------- ----------- ----------- -----------
Total other expenses (169,692) --- (407,331) ---
----------- ----------- ----------- -----------
Net loss $ (977,514) $ (60,536) $(5,365,578) $ (460,463)
=========== ========== =========== ===========
Net loss per common share $ (0.11) $ (0.01) $ (0.63) $ (0.05)
=========== ========== =========== ===========
Weighted average shares
outstanding 8,644,232 9,606,060 8,547,223 9,315,451
=========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
<TABLE>
<CAPTION>
V-ONE CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
SEPTEMBER 30,
-----------------------------------------
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net loss $ (5,365,578) $ (460,463)
----------- -----------
Adjustment to reconcile net loss to net cash used
in operating activities:
Provision for doubtful accounts 214,185 ---
Depreciation and amortization 55,701 22,841
Interest expense on accretion of note
payable 299,000 ---
Consulting expense satisfied by issuance
of Common Stock 34,738 ---
Compensation expense satisfied by
issuance of Common Stock 487,796 141,500
Compensation expense recognized for
receipt of contributed capital --- 45,000
Compensation expense for Common
Stock contributed to stock option plan 287,976 ---
Compensation expense for issuance of
Common Stock related to 1996 Non-
Statutory Stock Option Plan 1,439,867 ---
Accrued interest satisfied with Common
Stock 65,090 ---
Accrued interest satisfied with Preferred
Stock 59,554 ---
Changes in assets and liabilities:
Accounts receivable (1,659,299) (229,255)
Loan receivable --- (8,200)
Inventory (35,660) (175,876)
Prepaid expenses and other (128,976) (1,710)
Accounts payable and accrued
expenses and deferrals 1,871,679 (41,927)
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Net cash used in operating activities (2,373,927) (708,090)
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</TABLE>
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<TABLE>
<CAPTION>
V-ONE CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30
-----------------------------------------------------
1996 1995
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from investing activities:
Purchase of property and equipment (425,545) (3,110)
------------ -------------
Net cash used in investing activities (425,545) (3,110)
------------ -------------
Cash flows from financing activities:
Issuance of Common Stock --- 400,000
Issuance of Preferred Stock 1,000,000 ---
Issuance of debt with detachable
warrants 1,500,000 ---
Exercise of options and warrants 1,576 ---
Issuance of notes payable 1,250,000 ---
Contributed capital in lieu of cash
payment --- 90,000
Increase in deferred financing cost (1,239,164) ---
Principal payment on capital lease
obligations (27,273) ---
Repayment of notes payable (6,947) ---
Repayment of notes payable to related
parties (42,344) ---
Issuance of notes payable to related
parties --- 475,052
------------ -------------
Net cash provided by financing activities 2,435,848 965,052
------------ -------------
Net increase (decrease) in cash and cash
equivalents (363,624) 253,852
Cash and cash equivalents at beginning of
period 1,328,385 321,636
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Cash and cash equivalents at end of period $ 964,761 $ 575,488
============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
V-ONE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The condensed financial statements for the three-months and nine-months ended
September 30, 1996 and 1995 are unaudited and reflect all adjustments,
consisting of normal recurring adjustments, which are, in the opinion of
management, necessary to fairly present the results for the interim periods.
These financial statements should be read in conjunction with the audited
financial statements and notes for the year ended December 31, 1995 and for the
six-month period ended June 30, 1996 thereto included in V-ONE Corporation's
(the "Company" or "V-ONE") Post-Effective Amendment No. 1 to the Company's
registration statement on Form S-1 ("Registration Statement") that was filed
with the Securities and Exchange Commission on October 24, 1996 (SEC File No.
333-06535).
The preparation of financial statements to be in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets, liabilities and accrued litigation at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates
and would impact future results of operations and cash flows.
The results of operations for the three-month and nine-month periods ended
September 30, 1996 are not necessarily indicative of the results expected for
the full year ending December 31, 1996.
2. Initial Public Offering
The Company filed the Registration Statement relative to its initial public
offering (the "IPO") in June 1996. The Registration Statement became effective
on October 24, 1996. On October 29, 1996, the Company sold 3,000,000 shares of
its Common Stock to the public. The Company and certain shareholders have also
agreed to sell an additional 450,000 shares of Common Stock to the underwriters
to cover over-allotments, if any, of which 265,030 shares would be sold by the
Company. The underwriters have not yet exercised this option. The IPO resulted
in proceeds to the Company of approximately $12,645,000 of cash, net of
approximately $2,355,000 in underwriting fees and offering expenses, which are
not reflected in the financial statements for the period ending September 30,
1996. The Company will not receive any proceeds from the sale of shares by
selling shareholders in the over-allotment option.
3. Risks and Uncertainties
The Company invests its cash primarily in money market funds with an
international commercial bank. The Company has not experienced any losses to
date on its invested cash. The Company's cash balances exceed Federal insured
amounts.
The Company sells its product to a wide variety of customers in a variety of
industries. The Company performs ongoing credit evaluations of its customers but
does not require collateral or other security to support customer accounts
receivable. In management's opinion, the Company has provided sufficient
provisions to prevent a significant impact of credit losses to the financial
statements.
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<PAGE>
4. Computation of Net Loss Per Common and Common Equivalent Share
Net loss per share is computed based upon the weighted average number of
shares and common equivalent shares outstanding. Common equivalent shares are
included in the per share calculations where the effect of their inclusion would
be dilutive. In accordance with the Securities and Exchange Commission Staff
Accounting Bulletin No. 83 ("SAB No. 83"), all common and common equivalent
shares and other potentially dilutive instruments (including stock options,
warrants and redeemable convertible preferred stock) issued during the twelve
month period prior to the initial filing date on June 21, 1996 of the
Registration Statement have been included in the calculation as if they were
outstanding for all periods prior to the date of the IPO, even if the common
equivalent shares were anti-dilutive. The common equivalent shares for stock
options were determined using the treasury stock method at the IPO price of
$5.00 per share. The redeemable convertible preferred stock was included on an
as-if converted basis in accordance with SAB No. 83. Fully diluted net income
(loss) per common share is the same as primary.
5. Subsequent Events
In connection with the consummation of the IPO on October 29, 1996, the
following events occurred: (a) all outstanding shares of the Company's Series A
Convertible Preferred Stock ("Series A Stock") were automatically converted, on
a 1 for 1.20 basis, into an aggregate of 949,209 shares of the Company's Common
Stock, (b) the Company issued 188,705 shares of Common Stock to RSA Data
Security, Inc. ("RSA") and Massachusetts Institute of Technology ("MIT") in
satisfaction of RSA's right, pursuant to a software license agreement with the
Company ("RSA Agreement"), to receive a one-time payment for all future
royalties in shares of the Company's Common Stock and MIT's right, pursuant to a
separate agreement with RSA, to receive a portion any royalties received by RSA,
(c) the Company repaid an 8% per annum, $1.5 million note issued to JMI Equity
Fund II, L.P. ("JMI"), which was due upon the earlier of the consummation of the
IPO or June 18, 2000, (d) JMI's warrant to purchase 266,666 shares of Common
Stock at $4.50 per share was adjusted (as a result of the conversion of the
Series A Stock) so that it currently entitles JMI to purchase 306,666 shares of
Common Stock at $3.913 per share and (e) James F. Chen, the Company's founder,
President and Chief Executive Officer, contributed 52,885 shares of Common Stock
to the Company.
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<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of Section 21E
of the Securities Exchange Act of 1934. The Company's actual results may differ
significantly from the results discussed in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed in the "Risk Factors" set forth in the Company's Registration
Statement.
The Company develops, markets and licenses a comprehensive suite of network
security products that enable organizations to conduct secured electronic
transactions and information exchange using private enterprise networks and
public networks, such as the Internet. From inception in February 1993 until
December 1994, the Company' operating activities related to recruiting personnel
and conducting research and development. Revenues were minimal during 1993 and
1994. The Company introduced its first product, the SmartCAT smart card reader
and application software, in June 1994 and its second product, the SmartWall
application level firewall, in December 1994. In December 1995, the Company
introduced SmartGATE, client/server security enabling product.
Under the Company's revenue recognition policy, revenues are generally
recognized from the license of software upon shipment, net of allowances,
provided that no significant vendor obligations remain. In addition, the Company
often permits customers to evaluate products being considered for purchase,
generally for a period of up to 30 days, in which event the Company does not
recognize revenues until the customer has accepted the product. Accordingly, the
Company's revenue recognition policy does not necessarily correlate with the
signing of a contract or the shipment of a product.
As of September 30, 1996, the Company had an accumulated deficit of
approximately $7,010,000. The Company currently expects to incur net losses over
the next several quarters as a result of greater operating expenses incurred to
fund research and development and to increase its senior management and sales
and marketing efforts. To date, the Company has expensed all development costs
as incurred in compliance with Statement of Financial Accounting Standards No.
86, "Accounting for the Costs of Computer Software to Be Sold, Leased or
Otherwise Marketed." The Company believes that it will be able to continue to
expense all development costs as incurred.
The Company recently has hired and intends to continue to hire additional senior
level personnel. In addition, general and administrative costs have increased
significantly since the Company's date of inception and the Company expects such
costs to continue to increase in the future. The Company intends, however, to
adjust its level of expenditure for general and administrative expenses and for
research and development so that the levels are consistent with the Company's
revenue stream.
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<PAGE>
STATEMENT OF OPERATIONS DATA:
The following table sets forth certain statement of operations data (unaudited)
as a percentage of revenues for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September30,
----------------------------- --------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Products 91.8% 100.0% 94.3% 100.0%
Consulting and services 8.2 --- 5.7 ---
------ ------ ------ -----
Total revenues 100.0 100.0 100.0 100.0
------ ----- ------ ------
Cost of revenues:
Products 29.3 35.2 31.1 35.4
Consulting and services 0.7 --- 1.0 ---
------ ------ ------ -----
Total cost of revenues 30.0 35.2 32.1 35.4
------ ----- ------ ------
Gross profit 70.0 64.8 67.9 64.6
------ ----- ------ ------
Operating expenses:
Sales and marketing 52.2 6.8 62.8 12.4
General and
administrative 29.5 49.7 94.1 88.0
Research and development 35.3 25.3 32.0 27.7
------ ----- ------ ------
Total operating expenses 117.0 81.8 188.9 128.1
------ ----- ------ ------
Operating loss (47.0) (17.0) (121.0) (63.5)
------ ----- ------ ------
Other (expense) income:
Interest expense (11.1) --- (11.5) ---
Interest income 1.3 --- 1.6 ---
------ ------ ------ -----
Total other expenses (9.8) --- ( 9.9) ---
------ ------ ------ -----
Net loss (56.8)% (17.0)% (130.9)% (63.5)%
====== ===== ====== ======
</TABLE>
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<PAGE>
RESULTS OF OPERATIONS
REVENUES
Total revenues increased from $356,021 for the three months ended September 30,
1995 to $1,720,543 for the three months ended September 30, 1996. Total revenues
increased from $725,239 for the nine months ended September 1995 to $4,096,930
for the nine months ended September 1996. This increase was principally
attributable to increased sales of the Company's network security products.
PRODUCTS. Product revenues are derived principally from software licenses and
the sale of hardware products that incorporate software licenses. Product
revenues increased from $356,021 for the three months ended September 30, 1995
to $1,578,620 for the three months ended September 30, 1996. Product revenues
increased from $725,239 for the nine months ended September 30, 1995 to
$3,862,664 for the nine months ended September 30, 1996.
CONSULTING AND SERVICES. Consulting and services revenues are derived
principally from fees for services complementary to the Company's products,
including consulting, maintenance and training. Consulting and services revenues
were $141,923, or 8.2% of total revenue, for the three months ended September
30, 1996 and were $234,266, or 5.7% of total revenue, for the nine months ended
September 30, 1996. The Company did not receive any consulting and services
revenues in 1995.
COST OF REVENUES
COST OF PRODUCTS. Cost of product revenues consists principally of the costs of
computer hardware, licensed technology, manuals and labor associated with the
distribution and support of the Company's products. Cost of product revenues
increased from $125,482 for the three months ended June 30, 1995 to $503,484 for
the three months ended September 30, 1996. Cost of product revenues as a
percentage of product revenues was 35.2% and 31.9% for the three months ended
September 30, 1995 and 1996, respectively. Cost of product revenues increased
from $256,632 for the nine months ended September 30, 1995 to $1,276,813 for the
nine months ended September 30, 1996. Cost of product revenues as a percentage
of product revenues was 35.4% and 33.1% for the nine months ended September 30,
1995 and 1996, respectively. The increase in absolute dollars was principally
related to the higher level of product sales compared with the prior year's
period. The decrease in cost of product revenues as a percentage of product
revenues was primarily due to an increase in sales of the Company's software
products as a component of product revenues in the later period. The Company's
obligation to pay royalty fees to RSA in connection with the RSA Agreement
ceased as result of the Company's issuance to RSA of shares of the Company's
Common Stock upon consummation of the IPO.
COST OF CONSULTING AND SERVICES. Cost of consulting and services revenues
consists principally of personnel and related costs incurred in providing
consulting, support and training services to customers. There was no cost of
consulting and services revenues for the three months ended September 30, 1995
as compared to $11,954, or 8.4% of consulting and services revenues, for the
three months ended September 30, 1996. There was no cost of consulting and
services revenues for the nine months ended September 30, 1995 as compared to
$39,176, or 16.7% of consulting and services revenues, for the nine months ended
September 30, 1996.
OPERATING EXPENSES
SALES AND MARKETING. Sales and marketing expenses consist principally of the
costs of sales and marketing personnel, sales commissions, advertising,
promotions and trade shows. Sales and marketing expenses increased significantly
from $24,030 for the three months ended September 30, 1995 to $898,543 for the
three months ended September 30, 1996. Sales and marketing expenses as a
percentage of total revenues were 6.8% and 52.2% for the three months ended
September 30, 1995 and 1996, respectively. Sales and marketing expenses
increased significantly from $90,072 for the nine months ended September 30,
1995 to $2,570,981 for the nine months ended September 30, 1996. Sales and
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<PAGE>
marketing expenses as a percentage of total revenues were 12.4% and 62.8% for
the nine months ended September 30, 1995 and 1996, respectively. The dollar and
percentage increase were principally related to expenses associated with
increases in the number of sales and marketing personnel, as well as expenses
related to advertising and promotional efforts. Sales and marketing expenses can
be expected to increase both in the aggregate and as a percentage of total
revenues in the near term as a result of the Company's increased sales and
marketing efforts.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
principally of the costs of finance, management and administrative personnel and
facilities expenses. General and administrative expenses increased substantially
from $176,903 for the three months ended September 30, 1995 to $507,079 for the
three months ended September 30, 1996. General and administrative expenses as a
percentage of total revenues were 49.7% and 29.5% for the three months ended
September 30, 1995 and 1996, respectively. During the three months ended
September 30, 1996, the Company added $65,000 to its allowance for potentially
uncollectible accounts receivable, the increase in which is attributable to the
Company's increasing revenues and accounts receivable. General and
administrative expenses increased substantially from $638,066 for the nine
months ended September 30, 1995 to $3,856,594 for the nine months ended
September 30, 1996. General and administrative expenses as a percentage of total
revenues were 88.0% and 94.1% for the nine months ended September 30, 1995 and
1996, respectively. Included in general and administrative expenses for the nine
months ended September 30, 1996, is non-cash compensation expense of
approximately $2,515,000, which was recorded in conjunction with the grant of
options to purchase 590,394 shares of Common Stock at an exercise price of $3.75
per share and options to purchase 10,000 shares of Common Stock at an exercise
price of $4.50 per share, each granted pursuant to the Company's 1996 Incentive
Stock Plan, and the grant of options to purchase 383,965 shares of Common Stock
at an exercise price of $0.75 per share pursuant to the Company's 1996
Non-Statutory Stock Option Plan, the underlying shares of which were funded by a
contribution of 383,965 shares of Common Stock by James F. Chen, the Company's
founder, President and Chief Executive Officer, and warrants to purchase 66,666
shares of Common Stock issued to JMI at an exercise price of $0.015 per share.
The non-cash compensation expense was recognized in the second quarter of 1996.
A further $264,000 in non-cash compensation expense is expected to be recognized
in the fourth quarter of 1996 as a result of the pricing of the IPO. The
remainder of the dollar increase was principally attributable to additional
hiring of management and administrative personnel and professional and legal
fees. The percentage decrease was primarily due to allocation over a larger
revenue base. The Company anticipates that general and administrative expenses
will increase in future periods as result of further hires and the legal,
insurance and accounting costs associated with becoming a public company.
RESEARCH AND DEVELOPMENT. Research and development expenses consist principally
of the costs of research and development personnel and other expenses associated
with the development of new products and enhancement of existing products.
Research and development expenses increased significantly from $90,142 for the
three months ended September 30, 1995 to $607,305 for the three months ended
September 30, 1996. Research and development expenses as a percentages of total
revenues were 25.3% and 35.3% for the three months ended September 30, 1995 and
1996, respectively. Research and development expenses increased significantly
from $200,932 for the nine months ended September 30, 1995 to $1,311,613 for the
nine months ended September 30, 1996. Research and development expenses as a
percentage of total revenues were 27.7% and 32.0% for the nine months ended
September 30, 1995 and 1996, respectively. The dollar and percentage increases
were principally attributable to an increase in the number of personnel
associated with the Company's technical development efforts. The Company
believes that a continuing commitment to research and development is required to
remain competitive. Accordingly, the Company intends to allocate substantial
resources to research and development, but research and development expenses may
vary as a percentage of total revenues.
INTEREST INCOME AND EXPENSE. Interest income represents interest earned on cash,
cash equivalents and marketable securities. There was no interest income for the
three months ended September 30, 1995 as compared to $22,031 for the three
months ended September 30, 1996. There was no interest expense for the three
months ended September 30, 1995 as compared to $191,723 for the three months
ended September 30, 1996. There was no interest income for the nine months ended
September 30, 1995 as compared to $65,418 for the nine months ended September
30, 1996. There was no interest expense for the nine months ended September 30,
1995 as compared to $472,749 for the nine months ended September 30, 1996.
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3
<PAGE>
Interest expense represents interest payable or accreted on promissory
notes and capitalized lease obligations. A significant portion of the interest
expense recorded during 1996 relates to the JMI note, which was repaid with
proceeds from the IPO in the fourth quarter of 1996. See " Liquidity and Capital
Resources" below.
INCOME TAXES. The Company did not incur income tax expense for the three months
and nine months ended September 30, 1995 and 1996 as a result of the net loss
incurred during each period. As of September 30, 1996, the Company had net
operating loss carryforwards of approximately $ 6,701,000 as a result of net
losses incurred since inception.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents decreased by $363,624 from December 31,
1995 to September 30, 1996. The decrease resulted primarily from the use of cash
to fund operations and purchase capital equipment, which was partially offset by
the issuance of debt and equity. As of September 30, 1996, the Company had a
working capital deficit of $670,637, mainly attributable to short term notes due
to related parties of $1,601,800 due on consummation of the Company's IPO.
The Company's operating activities used cash of $2,373,927 for the nine months
ended September 30, 1996. Cash used in operating activities was principally a
result of net losses and increases in accounts receivable and prepaid expenses
and other current assets, which were partially offset by increases in accounts
payable and non-cash compensation expenses relating to the issuance of Common
Stock.
Capital expenditures for property and equipment were $425,545 for the nine
months ended September 30, 1996. These expenditures have generally been for
computer workstations and personal computers, office furniture and equipment,
and leasehold additions and improvements. The Company expects to purchase
additional computer equipment and office furniture in 1996. The Company may use
a portion of the net proceeds of the IPO for such expenditures.
The Company concluded its IPO on October 29, 1996 and raised, net of
underwriting discounts and related expenses, $12,645,000. The Company believes
that the net proceeds from the IPO, together with existing cash and cash
equivalents and funds generated from on-going operations will be sufficient to
finance the Company's operations at least through 1997. However, the Company may
require additional funds to support its working capital requirements or for
other purposes and may seek to raise such additional funds through public or
private equity financing or from other sources. No assurance can be given that
additional financing will be available or, if available, that such additional
financing will be on terms favorable to the Company or its shareholders.
- 13 -
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security-Holders
A special meeting of the holders of the Company's Common Stock and Series A
Stock was held on September 7, 1996. At this meeting, it was proposed to amend
the terms of the conversion of the Series A Stock as follows: (a) in the event
the initial offering price in the IPO were at least $7.00 per share, each share
of Series A Stock would automatically convert into 1.15 shares of Common Stock
on consummation of the IPO by October 31, 1996, and (b) in the event the initial
offering price in the IPO were less than $7.00 per share, each share of the
Series A Stock would automatically convert into 1.20 shares of Common Stock on
consummation of the IPO by October 31, 1996. Certain other technical changes to
the terms of the Series A Stock were also proposed.
At the meeting, the holders of the Common Stock and the Series A Stock voted as
a class to approve the proposed amendments as follows:
For Against Abstain
8,116,407 0 0
The holders of the Series A Stock also voted separately as a class to approve
the proposed amendments as follows:
For Against Abstain
593,542 0 0
As the initial offering price was $5.00 per share and the IPO was consummated on
October 29, 1996, each share of Series A Stock was automatically converted into
1.20 shares of Common Stock on October 29, 1996. Fractional shares of Common
Stock will be paid in cash at a rate of $7.00 per share.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibit 11 - Computation of Net Income (Loss) per Share
b) Exhibit 27 - Financial Data Schedule
c) Reports on form 8-K - None
- 14 -
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
V-ONE CORPORATION
Registrant
Date: November 14, 1996 /S/ CHARLES B. GRIFFIS
---------------------------
Name: Charles B. Griffis
Title: Senior Vice President and Chief
Financial Officer
(principal financial and
accounting officer)
- 15 -
EXHIBIT 11
<TABLE>
<CAPTION>
V-ONE CORPORATION
COMPUTATION OF NET INCOME (LOSS) PER SHARE
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income (loss)............. (60,536) (977,514) (460,463) (5,365,578)
Weighted average common shares
outstanding................... 8,416,760 8,644,232 8,126,151 8,547,223
Series A Convertible
Preferred Stock............... 949,209 --- 949,209 ---
Stock options issued within one
year of initial filing (using the
treasury stock method and the
initial public offering price
of $5.00 per share)........... 240,091 --- 240,091 ---
--------- --------- --------- ---------
Weighted average number of common
shares outstanding............ 9,606,060 8,644,232 9,315,451 8,547,223
========= ========= ========= =========
Net income (loss) per common
share and common share equivalent (.01) (.11) (.05) (.63)
========= ========= ========= =========
</TABLE>
1. All common share amounts have been restated to reflect a 2 for 3 reverse
stock split effected on July 3, 1996.
2. In accordance with the Securities and Exchange commission Staff
Accounting Bulletin No. 83 ("SAB No. 83"), all common and common
equivalent shares and other potentially dilutive instruments (including
stock options and the redeemable convertible preferred stock) issued
during the twelve month period prior to the initial filing date in June
1996 of the Registration Statement have been included in the calculation
as if they were outstanding for all periods presented prior to the IPO,
even if the common equivalent shares were anti-dilutive. The common
equivalent shares for stock options were determined using the treasury
stock method at the offeringn price of $5.00 per share. The redeemable
convertible preferred stock was included in an as-if converted basis in
accordance with SAB No. 83.
3. Fully diluted net income (loss) per share is the same as primary net
income (loss) per share.
4. Common stock equivalents have only been included when the effect of their
inclusion would be dilutive.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AND STATEMENT OF OPERATION AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 965
<SECURITIES> 0
<RECEIVABLES> 1,711
<ALLOWANCES> 23
<INVENTORY> 293
<CURRENT-ASSETS> 3,084
<PP&E> 758
<DEPRECIATION> 92
<TOTAL-ASSETS> 5,018
<CURRENT-LIABILITIES> 3,755
<BONDS> 0
3,560
0
<COMMON> 8
<OTHER-SE> (2,553)
<TOTAL-LIABILITY-AND-EQUITY> 5,018
<SALES> 4,097
<TOTAL-REVENUES> 4,097
<CGS> 1,316
<TOTAL-COSTS> 1,316
<OTHER-EXPENSES> 7,739
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 473
<INCOME-PRETAX> (5,366)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,366)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,366)
<EPS-PRIMARY> (.63)
<EPS-DILUTED> (.63)
</TABLE>
