UNITED STATES
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, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number 0-21511
V-ONE CORPORATION
-----------------
(Exact name of registrant as specified in its charter)
Delaware 52-1953278
------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
20250 Century Blvd., Suite 300, Germantown, Maryland 20874
----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(301) 515-5200
--------------
(Registrant's telephone number, including area code)
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 [X ] No [ ] .
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 3, 2000
----- -------------------------------
Common Stock, $0.001 par value per share 22,126,871
<PAGE>
V-ONE Corporation
Quarterly Report on Form 10-Q
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Condensed Balance Sheets as of September 30, 2000 (unaudited) 3
and December 31, 1999
Condensed Statements of Operations (unaudited) for the 4
Three and Nine Months Ended September 30, 2000 and
September 30, 1999
Condensed Statements of Cash Flows (unaudited) for the 5
Nine Months Ended September 30, 2000 and September 30,
1999
Notes to the Condensed Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and 8
Results of Operations
Item 3. Quantitative and Qualitative Disclosures About 11
Market Risk
PART II. OTHER INFORMATION 12
Signatures 14
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
V-ONE CORPORATION
CONDENSED BALANCE SHEETS
<CAPTION>
September 30, December 31,
2000 1999
(unaudited)
------------------ ------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,199,730 $ 7,136,943
Accounts receivable, net 1,001,310 854,853
Finished goods inventory, net 272,563 46,087
Prepaid expenses and other current assets 221,847 249,339
------------------ ------------------
Total current assets 5,695,450 8,287,222
Property and equipment, net 952,174 585,708
Other assets 447,847 902,506
------------------ ------------------
Total assets $ 7,095,471 $ 9,775,436
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,065,059 $ 1,157,660
Deferred revenue 981,087 420,922
Capital lease obligations - current 73,810 78,794
------------------ ------------------
Total current liabilities 2,119,956 1,657,376
Deferred rent 131,271 156,711
Capital lease obligations - noncurrent 66,322 119,746
------------------ ------------------
Total liabilities 2,317,549 1,933,833
Commitments and contingencies
Shareholders' equity:
Preferred stock, $0.001 par value, 13,333,333 shares authorized;
Series B convertible preferred stock, 1,287,554 designated, issued
and outstanding (liquidation preference of $3,000,000) 1,288 1,288
Series C redeemable preferred stock, 500,000 designated; 54,714
and 335,000 shares issued and outstanding, respectively
(liquidation preference of $1,436,243 and $8,793,750,
respectively) 55 335
Common stock, $0.001 par value; 33,333,333 shares authorized;
22,126,871 and 18,233,780 shares issued and outstanding,
respectively 22,127 18,233
Accrued dividends payable 144,710 272,245
Additional paid-in capital 51,471,405 47,197,893
Deferred stock compensation payable (188,000) -
Subscriptions receivable - (3,785)
Accumulated deficit (46,673,663) (39,644,606)
------------------ ------------------
Total shareholders' equity 4,777,922 7,841,603
------------------ ------------------
Total liabilities and shareholders' equity $ 7,095,471 $ 9,775,436
================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
<TABLE>
V-ONE CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
<CAPTION>
Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
(unaudited) (unaudited) (unaudited) (unaudited)
---------------- ---------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Revenue:
Products $ 387,844 $ 638,364 $ 2,234,595 $ 2,726,781
Consulting and services 257,641 294,530 870,658 909,253
------------------ ------------------ -------------------- --------------------
Total revenue 645,485 932,894 3,105,253 3,636,034
Cost of revenue:
Products 73,566 127,697 284,800 507,863
Consulting and services 71,053 17,682 94,273 50,294
------------------ ------------------ -------------------- --------------------
Total cost of revenue 144,619 145,379 379,073 558,157
------------------ ------------------ -------------------- --------------------
Gross profit 500,866 787,515 2,726,180 3,077,877
Operating expenses:
Sales and marketing 1,604,985 1,535,390 4,774,703 4,973,662
General and administrative 810,489 707,336 2,484,163 2,195,607
Research and development 890,820 605,426 2,410,036 2,080,418
------------------ ------------------ -------------------- --------------------
Total operating expenses 3,306,294 2,848,152 9,668,902 9,249,687
------------------ ------------------ -------------------- --------------------
Operating loss (2,805,428) (2,060,637) (6,942,722) (6,171,810)
Other income (expense):
Interest expense (5,196) (592,600) (17,534) (893,616)
Interest income 109,266 15,186 264,977 55,412
------------------ ------------------ -------------------- --------------------
Total other income (expense) 104,070 (577,414) 247,443 (838,204)
------------------ ------------------ -------------------- --------------------
Net loss (2,701,358) (2,638,051) (6,695,279) (7,010,014)
Dividend on preferred stock 36,612 50,594 333,778 50,594
------------------ ------------------ -------------------- --------------------
Loss attributable to holders
of common stock $ (2,737,970) $ (2,688,645) $ (7,029,057) $ (7,060,608)
================== ================== ==================== ====================
Basic and diluted loss per share
attributable to holders of
common stock $ (0.12) $ (0.16) $ (0.34) $ (0.42)
================== ================== ==================== ====================
Weighted average number of
common shares outstanding 22,036,612 16,847,796 20,478,168 16,777,492
================== ================== ==================== ====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
V-ONE CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
Nine months Nine months
ended Ended
September 30, 2000 September 30, 1999
(unaudited) (unaudited)
------------------ --------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (6,695,279) $ (7,010,014)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 287,666 504,775
Stock compensation 249,679 -
Amortization of deferred financing costs - 405,000
Changes in operating assets and liabilities:
Accounts receivable, net (146,457) (61,428)
Inventory, net (226,476) 176,029
Prepaid expenses and other assets 482,150 258,014
Deferred revenue 560,166 (320,309)
Deferred rent (25,440) -
Accounts payable and accrued expenses (92,601) (474,779)
---------------- --------------------
Net cash used in operating activities (5,606,592) (6,522,712)
Cash flows from investing activities:
Net purchases of property and equipment (654,132) (131,938)
Collection of note receivable 3,785 678
---------------- --------------------
Net cash used in investing activities (650,347) (131,260)
Cash flows from financing activities:
Exercise of options and warrants 169,697 1,037,243
Payment of debt financing costs - (210,000)
Issuance of common stock 3,375,000 -
Issuance of preferred stock, net of subscriptions receivable - 11,793,750
Payments of stock issuance costs (166,547) (933,232)
Payment of preferred stock dividends (16) -
Principal payments on capital lease obligations (58,408) (51,760)
Repayment of notes payable - (5,259)
Issuance of notes payable - 2,900,000
---------------- --------------------
Net cash provided by financing activities 3,319,726 14,530,742
---------------- --------------------
Net (decrease) increase in cash and cash equivalents (2,937,213) 7,876,770
Cash and cash equivalents at beginning of period 7,136,943 635,959
---------------- --------------------
Cash and cash equivalents at end of period $ 4,199,730 $ 8,512,729
================ ====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
V-ONE CORPORATION
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
September 30, 2000
(Unaudited)
1. Basis of Presentation
The condensed financial statements for the three and nine months ended September
30, 2000 and September 30, 1999 are unaudited and reflect all adjustments,
consisting of normal recurring adjustments, which are, in the opinion of
management, necessary to present fairly the results for the interim periods.
These financial statements should be read in conjunction with the audited
financial statements as of December 31, 1998 and 1999 and for the three years in
the period ended December 31, 1999, which are included in the Company's 1999
Annual Report on Form 10-K ("Form 10-K").
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 and liabilities at the date of the financial
statements and the reported amounts of revenue 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 and nine month periods ended September
30, 2000 are not necessarily indicative of the results expected for the full
year ending December 31, 2000.
Certain prior year amounts have been reclassified to conform to the 2000
presentation. These changes had no impact on previously reported results of
operations.
2. Common and Preferred Stock
In the nine months ended September 30, 2000, several investors exercised the
non-detachable warrants of the Series C Preferred Stock. As a result of these
exercises, 2,802,860 shares of common stock were issued. 97,449 shares of common
stock were issued as dividends on the Series C Preferred Stock during the nine
months ending September 30, 2000. The Series C Preferred Stock was reduced by
280,286 shares as a result of the warrant exercises pursuant to the terms of the
September 9, 1999 offering. There were no proceeds generated from these
exercises.
Restricted common stock amounting to 158,316 shares were issued to certain
selected employees as compensation in the second quarter of 2000, 50% of which
have vested as of September 30, 2000, with the remaining shares vesting over the
next two quarters.
In June 2000, the Company issued, pursuant to Rule 506 of Regulation D, 274,967
shares of Common Stock at a purchase price of $3.64 per share to Citrix Systems,
Inc. in exchange for $1,000,000. A licensing agreement was also signed with
Citrix Systems, Inc. in the second quarter.
3. Supplemental Cash Flow Disclosure
Selected noncash activities were as follows:
Nine months ended September
30,
2000 1999
(unaudited) (unaudited)
------------- -------------
Noncash investing and financing activities:
Redemption of preferred stock (7,357,508) -
Payment of preferred stock dividends (461,313) -
6
<PAGE>
4. Net Loss Per Share
The following table sets forth the computation of basic and
diluted net loss per share:
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
ended ended ended ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Numerator:
Net loss $(2,701,358) $(2,638,051) $(6,695,279) $(7,010,014)
Less: Dividend on preferred stock (36,612) (50,594) (333,778) (50,594)
---------------------------------------------------------------------
Net loss attributable to holders of
common stock $ (2,737,970) $ (2,688,645) $ (7,029,057) $ (7,060,608)
=====================================================================
Denominator:
Denominator for basic and diluted
net loss per share - weighted
average shares 22,036,612 16,847,796 20,478,168 16,777,492
=====================================================================
Basic and diluted loss per share
Net loss attributable to holders of
common stock $ (0.12) $ (0.16) $ (0.34) $ (0.42)
=====================================================================
Due to their anti-dilutive effect, outstanding shares of preferred
stock, stock options and warrants to purchase shares of common
stock were excluded from the computation of diluted earnings per
share for all periods presented.
</TABLE>
7
<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. These statements may differ in a
material way from actual future events. For instance, factors that could cause
results to differ from future events include rapid rates of technological change
and intense competition, among others. The Company's total revenue and operating
results have varied substantially from quarter to quarter and should not be
relied upon as an indication of future results. Several factors may affect the
ability to forecast the Company's quarterly operating results, including the
size and timing of individual software and hardware sales; the length of the
Company's sales cycle; the level of sales and marketing, research and
development and administrative expenses; and general economic conditions.
Operating results for a given period could be disproportionately affected by any
shortfall in expected revenue. In addition, fluctuation in revenue from quarter
to quarter will likely have an increasingly significant impact on the Company's
results of operations. The Company's growth in recent periods may not be an
accurate indication of future results of operations in light of the Company's
short operating history, the evolving nature of the network security market and
the uncertainty of the demand for Internet and intranet products in general and
the Company's products in particular. Because the Company's operating expenses
are based on anticipated revenue levels, a small variation in the timing of
recognition of revenue can cause significant variations in operating results
from quarter to quarter.
Readers are also referred to the documents filed by the Company with the SEC,
specifically the Company's latest Annual Report on Form 10-K that identifies
important risk factors for the Company.
RESULTS OF OPERATIONS
REVENUE
Total revenue decreased 31% from approximately $933,000 for the three months
ended September 30, 1999 to approximately $645,000 for the three months ended
September 30, 2000. This decrease was primarily due to lower product revenue.
For the nine months ended September 30, 2000, total revenue decreased 15% to
approximately $3,105,000 from approximately $3,636,000 for the same period in
1999. The decline was caused mainly by a drop in the sales of firewall products,
off approximately $499,000, or 66%. Sales of seat licenses for the first nine
months of 2000 decreased by $99,000, or 5.4% compared to the same period of
1999. Product revenue is derived principally from software licenses and the sale
of hardware products. Product revenue decreased from approximately $638,000 for
the three months ended September 30, 1999 to approximately $388,000 for the
three months ended September 30, 2000. For the nine months ended September 30,
2000, total product revenue decreased 18% to approximately $2,235,000 from
approximately $2,727,000 for the same period in 1999. Consulting and services
revenue is derived principally from fees for services complementary to the
Company's products, including consulting, maintenance and training. Consulting
and services revenue decreased from approximately $295,000 for the three months
ended September 30, 1999 to approximately $258,000 for the three months ended
September 30, 2000 due principally to fewer continuing maintenance contracts.
Consulting and services revenue for the nine months ending September 30, 2000
was approximately $871,000, down $38,000 from approximately $909,000 for the
same period in 1999.
COST OF REVENUE
Total cost of revenue as a percentage of total revenue was approximately 16% and
22% for the three months ended September 30, 1999 and 2000, respectively. For
the nine months ended September 30, 2000, total cost of revenue decreased to
approximately $379,000 from approximately $558,000 for the same period in 1999.
Total cost of revenue is comprised of cost of product revenue and cost of
consulting and services revenue, as well as reserves taken for slow moving
inventory.
Cost of product revenue 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 revenue decreased from
8
<PAGE>
approximately $128,000 for the three months ended September 30, 1999 to
approximately $74,000 for the three months ended September 30, 2000. Cost of
product revenue as a percentage of product revenue was approximately 20% and 19%
for the three months ended September 30, 1999 and 2000, respectively. For the
nine months ended September 30, 2000, total cost of product revenue decreased to
approximately $285,000 from approximately $508,000 for the same period in 1999,
due in part to inventory obsolescence reserves created in 1999. Cost of product
revenue as a percentage of product revenue was approximately 19% and 13% for the
nine months ended September 30, 1999 and 2000, respectively. The dollar and
percentage decreases in 2000 were primarily attributable to a higher proportion
of software licenses of the Company's principal product, SmartGate, as compared
to turnkey hardware and third-party firewall sales.
Cost of consulting and services revenue consists principally of personnel and
related costs incurred in providing consulting, support and training services to
customers. Cost of consulting and services revenue increased from approximately
$18,000 for the three months ended September 30, 1999 to approximately $71,000
for the three months ended September 30, 2000. Cost of consulting and services
revenue as a percentage of consulting and services revenue was approximately 6%
and 28% for the three months ended September 30, 1999 and 2000, respectively.
The dollar and percentage increases were principally due to a higher number of
renewals of third-party software maintenance contracts requested by customers.
Cost of consulting and services revenue increased from approximately $50,000 for
the nine months ended September 30, 1999 to approximately $94,000 for the nine
months ended September 30, 2000. Cost of consulting and services revenue as a
percentage of consulting and services revenue was approximately 6% and 11% for
the nine months ended September 30, 1999 and 2000, respectively.
OPERATING EXPENSES
Sales and Marketing -- Sales and marketing expenses consist principally of the
costs of sales and marketing personnel, advertising, promotions and trade shows.
Sales and marketing expenses increased by $70,000 from approximately $1,535,000
for the three months ended September 30, 1999 to approximately $1,605,000 for
the three months ended September 30, 2000. Sales and marketing expenses as a
percentage of total revenue were approximately 165% and 249% for the three
months ended September 30, 1999 and 2000, respectively. The dollar increase is
mainly due to higher trade show, advertising and promotion expenses in the third
quarter when compared to last year. For the nine months ended September 30,
2000, total sales and marketing decreased 4% to approximately $4,775,000 from
approximately $4,974,000 for the same period in 1999 due to lower consulting
expenses. Sales and marketing expenses are expected to decrease in the near term
as a result of the Company's new narrower focus on distribution and related
marketing effort. This statement is based on current expectations. It is
forward-looking, and the actual results could differ materially. For information
about factors that could cause the actual results to differ materially, please
refer to Item 1. "Business - Risk Factors That May Affect Future Results and
Market Price of Common Stock" in the Company's Form 10-K.
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 from
approximately $707,000 for the three months ended September 30, 1999 to
approximately $810,000 for the three months ended September 30, 2000. General
and administrative expenses as a percentage of total revenue were approximately
76% and 126% for the three months ended September 30, 1999 and 2000,
respectively. The dollar and percentage increases in 2000 were principally due
to increased spending on professional fees. For the nine months ended September
30, 2000, total general and administrative increased 13% to approximately
$2,484,000 from approximately $2,196,000 for the same period in 1999. The
Company anticipates that general and administrative expenses, exclusive of costs
associated with financings, will increase modestly in future periods. This
statement is based on current expectations. It is forward-looking, and the
actual results could differ materially. For information about factors that could
cause the actual results to differ materially, please refer to Item 1. "Business
- Risk Factors That May Affect Future Results and Market Price of Common Stock"
in the Company's Form 10-K.
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 from
approximately $605,000 for the three months ended September 30, 1999 to
approximately $891,000 for the three months ended September 30, 2000. Research
and development expenses as a percentage of total revenue were approximately 65%
and 138% for the three months ended September 30, 1999 and 2000, respectively.
The dollar and percentage increases were primarily due to higher wage related
9
<PAGE>
costs as well as consulting and recruiting fees and a lower revenue base. For
the nine months ended September 30, 2000, total research and development
expenses increased 16% to approximately $2,410,000 from approximately $2,080,000
for the same period in 1999. Higher staff costs and recruiting expenses were
offset in part by lower consulting expenses when comparing the first nine months
of this year to the same period in 1999. 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 revenue. This statement is based on current expectations. It is
forward-looking, and the actual results could differ materially. For information
about factors that could cause the actual results to differ materially, please
refer to Item 1. "Business - Risk Factors That May Affect Future Results and
Market Price of Common Stock" in the Company's Form 10-K.
Interest Income and Expenses -- Interest income represents interest earned on
cash and cash equivalents. Interest income increased from approximately $15,000
for the three months ended September 30, 1999 to approximately $109,000 for the
three months ended September 30, 2000. For the nine months ended September 30,
2000, total interest income increased 378% to approximately $265,000 from
approximately $55,000 for the same period in 1999. The increase was attributable
to higher levels of investments of available cash and cash equivalents. Interest
expense represents interest paid or payable on the loans and capital lease
obligations. Interest expense decreased from approximately $593,000 for the
three months ended September 30, 1999 to approximately $5,000 for the three
months ended September 30, 2000. The decrease was primarily due to the payoff in
the third quarter of 1999 of a loan obtained in the first quarter of 1999. For
the nine months ended September 30, 2000, total interest expense decreased 98%
to approximately $18,000 from approximately $894,000 for the same period in
1999.
Income Taxes -- The Company did not incur income tax expense as a result of the
net loss incurred during the nine months ended September 30, 1999 and 2000,
respectively.
Dividend on Preferred Stock -- The Company provided approximately $37,000 for a
dividend on the Series C Preferred Stock during the third quarter of 2000, and
$334,000 for the nine months period ending September 30, 2000. Under the terms
of the Series C Preferred Stock Agreement the Company may elect to pay these
related dividends in cash and or stock.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities used cash of approximately $6,523,000 and
$5,607,000 for the nine months ended September 30, 1999 and 2000, respectively.
Cash used in operating activities resulted principally from net losses in both
periods. The Company believes that its current cash and cash equivalents and
funds that may be generated from on-going operations will be sufficient to meet
its normal operating requirements at least through March 31, 2001. In October
2000, the Company implemented a cost reduction program and has taken immediate
steps to reduce spending by approximately $2.5 million dollars a year by
reducing sales and marketing staff and more narrowly focusing sales and
marketing efforts. Additionally, the Company has initiated an effort to increase
its cash reserves by approximately $8 - $10 million through a private placement
of equity and through the sale of its 6.8% holding in the stock of Network
Flight Recorder (NFR). The Company believes it can successfully complete these
transactions so that it will have the additional capital funds needed to sustain
operations through December 31, 2001 and to maintain capital needed to satisfy
listing requirements on the NASDAQ Small Cap Market.
Capital expenditures for property and equipment were approximately $131,000 and
$654,000 for the nine months ended September 30, 1999 and 2000, respectively.
These expenditures have generally been for computer workstations and personal
computers, office furniture and equipment, and leasehold additions and
improvements. The increase this year is due to the purchase of existing
furniture and computer equipment at the termination of a long-term lease, and
the acquisition of new enterprise software used in customer opportunity
management and support.
The Company's financing activities provided cash of approximately $14,531,000
and $3,320,000 during the nine months ended September 30, 1999 and 2000,
respectively. In the first nine months of last year the cash was provided mainly
from issuance of Series B Preferred Stock of $3,000,000 and Series C Preferred
Stock of $8,793,750, these two items partially offset by stock issuance costs of
approximately $1,143,000. Other positive cash items of note are the funds
generated by exercise of options and warrants of approximately $1,037,000 and
10
<PAGE>
the issuance of notes payable to Citibank of $2,900,000 under a revolving credit
line. In the first nine months of this year the Company issued, pursuant to Rule
506 of Regulation D, 500,000 shares of Common Stock at a purchase price of $4.75
per share to Cranshire Capital, L.P. in exchange for $2,375,000 and 274,967
shares Common Stock at a purchase price of $3.64 per share to Citrix Systems,
Inc. in exchange for $1,000,000.
The Company's net tangible asset balance of $7,842,000 and $4,778,000 at
December 31, 1999 and September 30, 2000, respectively, reflects favorably on
the resources of the organization.
As of September 30, 2000, the Company had an accumulated deficit of
approximately $46,674,000. The Company currently expects to achieve
profitability in the fiscal year 2001. This statement is based on current
expectations. It is forward-looking, and the actual results could differ
materially. For information about factors that could cause the actual results to
differ materially, please refer to Item 1. "Business - Risk Factors That May
Affect Future Results and Market Price of Common Stock" in the Company's Form
10-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is not materially exposed to fluctuations in currency exchange rates
as all of its products are invoiced in U.S. dollars. The Company does not hold
any derivatives or marketable securities. However, the Company is exposed to
interest rate risk. The Company believes that the market risk arising from
holdings of its financial instruments is not material.
11
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
On January 27, 2000, plaintiff George McMeen filed a Class Action Complaint in
the U.S. District Court for the District of Maryland, Civil Action No.
MJG-CV-263, against David D. Dawson, Steve Mogul and Margaret Grayson
(collectively "Individual Defendants") and the Company (collectively,
"Defendants"), alleging claims for violation of Section 10(b) of the Securities
Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 thereunder by the
Defendants, and violation of Section 20(a) of the Exchange Act by the Individual
Defendants. On February 16, 2000, plaintiff Raj Patel filed a nearly identical
Class Action Compliant in the U.S. District Court for the District Court of
Maryland, Civil Action No. PJM-CV-469. Neither complaint specifies the amount of
alleged damages.
On February 18, 2000, the Court entered an Order extending the time for
Defendants to file a responsive pleading in the McMeen matter until 45 days
after the later of appointment of Lead Plaintiff(s) and Lead Counsel pursuant to
15 U.S.C. 78u-4(a)(3) or the filing of a consolidated amended compliant in the
matter. The Court entered an identical Order in the Patel matter on March 3,
2000.
Defendants deny all wrongdoing and intend to contest both cases vigorously. Both
cases remain pending.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibit and Reports on Form 8-K
(a) The following exhibits are filed as part of this quarterly report on
Form 10-Q for the period ended September 30, 2000:
Exhibit Description
------- -----------
27 Financial data schedule for the nine months ended September 30, 2000.
(b) There were no reports on Form 8-K filed for the quarter ended
September 30, 2000.
12
<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 3, 2000 By: /s/ Margaret E. Grayson
-----------------------------
Name: Margaret E. Grayson
Title: Senior Vice President and Chief
Financial Officer
(Duly authorized officer)
13
