As filed with the Securities and Exchange Commission on December 21, 2004
File No. 333-113963
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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.)
20300 Century Boulevard, Suite 200, Germantown, MD 20874
(301) 515-5200
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(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Margaret E. Grayson
President and Chief Executive Officer
V-ONE Corporation
20300 Century Boulevard
Suite 200
Germantown, MD 20874
(301) 515-5246
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(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Copies to:
Thomas F. Cooney, Esq.
Alissa A. Parisi, Esq.
Sidney R. Smith, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
Washington, DC 20036-1800
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [X]
If the registrant elects to deliver its latest annual report (on Form
10-K) to security holders, or a complete and legal facsimile thereof, pursuant
to Item 11(a)(1) of this Form, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Proposed
Title of Each Class of Amount To Maximum Proposed Maximum Amount of
Securities To Be Be Offering Price Aggregate Registration
Registered Registered(1) Per Share(2) Offering Price(2) Fee(2)
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Common Stock, $.001 par 6,000,000 $0.345 $4,140,000 $524.54
value per share (3)(4)
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Common Stock, $.001 par 1,050,000 $0.345 $724,500 $91.79
value per share (4)(5)
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Common Stock, $.001 par 630,000 $0.345 $434,700 $55.08
value per share (4)(6)
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Total 7,680,000 $0.345 $5,299,200 $671.41*
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* Paid previously.
(1) Share amounts reflect the 1:2 reverse stock split that V-ONE effected on May 14, 2004.
(2) Estimated pursuant to Rule 457 for the purpose of calculating the registration fee only;
based upon the average of the high and low sales prices for the common stock of V-ONE
Corporation ("Common Stock") reported on the "Pink Sheets" by the National Quotation Bureau,
Inc. on March 23, 2004. Registration fee is calculated pursuant to Rule 457(c) and reflects
Common Stock price prior to the 1:2 reverse stock split that V-ONE effected on May 14, 2004.
(3) Consists of 3,000,000 shares of Common Stock issuable upon the conversion of V-ONE
Corporation's 7% Subordinated Convertible Notes and 3,000,000 shares of Common Stock
issuable upon the exercise of detachable warrants to purchase Common Stock granted in
connection with the offering of V-ONE Corporation's 7% Subordinated Convertible Notes.
(4) Pursuant to Rule 416(a), also includes such indeterminate number of additional shares of
Common Stock as may become issuable to prevent dilution resulting from stock splits, stock
dividends or similar transactions.
(5) Represents shares of Common Stock issuable in discharge of accrued interest on V-ONE
Corporation's 7% Subordinated Convertible Notes.
(6) Represents shares of Common Stock issuable upon the exercise of warrants to purchase Common
Stock granted to H. C. Wainwright & Co., Inc., placement agent for V-ONE Corporation's 7%
Subordinated Convertible Notes offering, 438,375 shares of which are currently held by
certain employees of H.C. Wainwright & Co., Inc. who are listed as selling stockholders in
the Selling Stockholders section of this prospectus on pages 7-10. None of the H.C.
Wainwright employees acquired such shares to be resold in the ordinary course of business or
had any agreements or understanding, directly or indirectly, to distribute such shares at
the time of distribution.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
PROSPECTUS
Subject to Completion, December 21, 2004
7,680,000 Shares
V-ONE corporation
COMMON STOCK
The 7,680,000 shares of Common Stock of V-ONE Corporation ("V-ONE" or "the
Company") offered through this prospectus may be sold by the stockholders listed
on pages 8 and 9 of this prospectus. The sale of shares offered through this
prospectus may be effected by the selling stockholders from time to time in
transactions reported on the "Pink Sheets" by the National Quotation Bureau,
Inc. in privately negotiated transactions or in a combination of such methods of
sale. The shares may be sold at fixed prices that may change, at prices
prevailing at the time of sale, at prices relating to such prevailing prices or
at negotiated prices. None of the proceeds from this offering will be received
by V-ONE.
V-ONE's Common Stock is currently reported on the "Pink Sheets" by the
National Quotation Bureau, Inc. under the trading symbol "VONE." V-ONE's
principal executive offices are located at 20300 Century Boulevard, Suite 200,
Germantown, Maryland 20874. V-ONE's telephone number is (301) 515-5200.
POTENTIAL INVESTORS SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING
ON PAGE 2 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL THEIR SHARES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
, 2004
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V-ONE CORPORATION
V-ONE develops, markets, and licenses a comprehensive suite of network
security products that enables organizations to conduct secured electronic
transactions and information exchange using private enterprise networks and
public networks, such as the Internet. V-ONE's suite of products addresses
network user authentication, perimeter security, access control, and data
integrity through the use of smart cards, firewalls, and encryption technology.
V-ONE's products interoperate seamlessly and can be combined to form a complete,
integrated network security solution or can be used as independent components in
customized security solutions. V-ONE's products have been designed with an open
and flexible architecture to enable applications to work better and to support
future network security standards. In addition, V-ONE's products enable
organizations to deploy and scale their solutions from small, single-site
networks to large, multi-site environments and can accommodate both wireline and
wireless media.
V-ONE was incorporated in Maryland in February 1993 and reincorporated in
Delaware in February 1996. Effective July 2, 1996, V-ONE changed its name from
"Virtual Open Network Environment Corporation" to "V-ONE Corporation."
RISK FACTORS
V-ONE operates in a rapidly changing environment that involves numerous
risks, some of which are beyond V-ONE's control. The following discussion
addresses risks V-ONE believes to be material to its business and operations.
This prospectus contains "forward-looking statements." Such statements involve
known and unknown risks and uncertainties that could cause V-ONE's actual
performance or achievements to differ from any future performance or
achievements expressed or implied by such statements. Readers should carefully
consider the following risk factors before purchasing Common Stock of V-ONE.
Readers are also referred to the documents filed by V-ONE with the Securities
and Exchange Commission ("SEC"), specifically V-ONE's 2003 Annual Report on Form
10-K, which identify important risk factors for V-ONE.
LACK OF AVAILABLE CAPITAL COULD ADVERSELY AFFECT V-ONE'S ABILITY TO
CONTINUE OPERATIONS; COMPLETION OF AN OFFERING OF SECURITIES COULD BE CRUCIAL TO
V-ONE'S ABILITY TO CONTINUE OPERATIONS.
V-ONE may not be able to continue operations beyond December 31, 2004
unless it raises additional capital or receives purchase orders under active
programs for federal, state and local governments that have been delayed as the
federal government has sought to define the nature and scope of its Homeland
Security initiative. V-ONE's operating activities used cash of approximately
$29,000 in 2003, at an average "burn rate" of approximately $2,400 per month.
V-ONE is continuing to streamline operations and reduce costs as it implements
its turnaround strategy. V-ONE's approach as it navigates the market penetration
phase of its turnaround program focuses on distribution of V-ONE's products to
existing customers and channel partners. That said, V-ONE is very focused on the
fact that its cash position may not be adequate to allow the Company to
capitalize on all of the opportunities it has initiated. V-ONE will focus its
engineering design efforts on completing features committed to meet the needs of
existing and potential customers in the government sector and supporting
relationships with its channel partners for sales and marketing to commercial
accounts. V-ONE may not be able to maintain operations for any extended period
of time without additional capital or a significant strategic transformative
event. V-ONE's ability to continue as a going concern is dependent on its
ability to generate sufficient cash flow to meet its obligations on a timely
basis or to obtain additional funding. There can be no assurance that the timing
of acceptance and implementation of V-ONE's products with existing customers or
proposed agreements will generate revenue for V-ONE to cover its cost of
operations and meet its cash flow requirements.
V-ONE MAY NEED TO RAISE FUNDS THROUGH THE ISSUANCE OF ADDITIONAL
SECURITIES, WHICH ISSUANCES MAY DIMINISH THE VALUE OF ITS OUTSTANDING
SECURITIES.
V-ONE may need to raise additional capital to fund the costs associated
with the operation of its business beyond December 31, 2004. To meet its cash
needs in the near term, V-ONE is depending upon product sales. V-ONE also
intends to seek additional funding when market conditions improve. There can be
no assurance that such funding will be available on acceptable terms or at all.
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If V-ONE receives additional funding, it may be obligated to issue shares
of preferred stock and securities convertible into shares of Common Stock. The
issuance of such additional shares and securities may substantially dilute the
value of V-ONE. Such additional shares and securities may contain terms allowing
for, among other things, certain preferences in allocation of net income or
profits, in distributions of cash and property or in liquidation. Other terms
may possibly include protections against potential dilution of an investor's
interest by the issuance of new equity by V-ONE or preemptive and maintenance
rights to maintain such equity interest, special voting rights or rights in
connection with the potential future registration of V-ONE's securities for sale
to the public.
COMPLETION OF A PRIVATE OFFERING MAY BE SUBJECT TO THE RIGHTS OF THE
HOLDERS OF V-ONE PREFERRED STOCK AND 7% NOTES.
There are currently two outstanding classes of V-ONE's preferred stock. As
more particularly set forth in V-ONE's Certificate of Incorporation, holders of
shares of V-ONE's Series C and Series D Preferred Stock have rights and
preferences that may obligate V-ONE to obtain their consent prior to issuing
preferred stock in a private offering. If V-ONE is not able to obtain the
consent of these security holders on terms acceptable to prospective investors
in an offering, V-ONE may not be able to complete the private offering in a
timely manner. Similarly, holders of V-ONE's 7% Subordinated Convertible Notes
("7% Notes") have rights and preferences that may obligate V-ONE to obtain their
consent prior to issuing additional securities in a private offering.
ADVERSE ECONOMIC IMPACT OF A SLOW GLOBAL ECONOMY COULD IMPAIR V-ONE'S
REVENUES.
A slow global economy, as hampered by the events of September 11, 2001,
has created an uncertain international economic environment, and management
cannot predict the impact of any future terrorist acts or any related military
action on V-ONE's customers or their businesses. In particular, V-ONE's
commercial customers could be negatively affected by the sluggish international
economy. Although management believes that spending on security products will
increase as a result of these events, if businesses curtail or eliminate capital
spending on information technology, or if downturns in the Internet
infrastructure and related markets continue, businesses may delay or cancel
orders for security products which could result in reduced or cancelled orders
for V-ONE's products. In addition, these uncertain economic times could cause
longer sales cycles, payment delays and price pressure, and consequently, V-ONE
may not meet its financial forecast.
V-ONE'S CONTINUED LOSSES AND ACCUMULATED DEFICIT COULD AFFECT
PROFITABILITY AND MARKET ACCEPTANCE OF V-ONE'S PRODUCTS.
As of December 31, 2003, V-ONE had an accumulated deficit of approximately
$66,514,000. V-ONE is implementing a turnaround business plan, which management
believes will enable V-ONE to achieve profitable operating results in the
future. V-ONE may not, however, achieve or sustain profitability or significant
revenues in the short run. To address these risks, V-ONE must, among other
things, continue its emphasis on research and development, successfully execute
and implement its marketing strategy, respond to competitive developments and
seek to attract and retain talented personnel. V-ONE may be unable successfully
to address these risks and the failure to do so could affect V-ONE's ability to
fully implement its marketing strategy and achieve profitability and may have a
material adverse effect on the market acceptance of V-ONE's products. V-ONE was
founded in February 1993 and introduced its first product in December 1994.
Accordingly, V-ONE did not generate any significant revenues until 1995 when it
commenced sales of its firewall product and introduced its SmartGate
client/server system. Revenues for the years 1999, 2000, 2001, 2002 and 2003
were approximately $4,966,000, $4,554,000, $4,990,000, $3,553,000 and
$4,003,000, respectively. Losses attributable to holders of Common Stock for the
years 1999, 2000, 2001, 2002 and 2003 were approximately $9,952,000, $9,232,000,
$9,911,000, $6,335,000 and $1,392,000, respectively. V-ONE's results of
operations in recent periods may not be an accurate indication of future results
of operations in light of the evolving nature of the network security market and
the uncertainty of the demand for Internet and intranet products in general and
V-ONE's products in particular.
3
SALES TO GOVERNMENT AGENCIES CONSTITUTE A SIGNIFICANT PERCENTAGE OF
V-ONE'S REVENUE AND ARE SUBJECT TO VARIOUS POLICIES AND LENGTHY TESTING PERIODS
THAT EXPOSE V-ONE TO FINANCIAL RISKS.
No government agency or department has an obligation to purchase products
from V-ONE in the future and the government may terminate its contracts without
cause. Moreover, sales to and contracts with government agencies are subject to
reductions or delays in funding, risks of disallowance of costs upon audit,
changes in government procurement policies, the necessity to participate in
competitive bidding and, with respect to contracts involving prime contractors
or government-designated subcontractors, the inability of such parties to
perform under their contracts. In addition, product implementation in government
sales may be subject to extended periods of rigorous validation testing and a
lengthy approval process by government agencies and bureaus within an agency.
Such testing and approval may delay contract awards and payments to V-ONE under
such contracts. Sales to the U.S. government constituted approximately 67% of
V-ONE's revenue for the fiscal year ended December 31, 2003. V-ONE expects to
derive a significant amount of its revenue in 2004 from sales to government
agencies.
RISKS OF COMPETITION COULD AFFECT V-ONE'S MARKET SHARE AND ADVERSELY
AFFECT REVENUE AND PROFITABILITY.
V-ONE faces intense competition in all of its market segments. The market
for network security products is very competitive and V-ONE expects competition
to intensify in the future. There can be no assurance that V-ONE's products will
command a significant share of the network security market. Many of V-ONE's
competitors have significantly greater resources, generate higher revenue and
have greater name recognition than V-ONE. There can be no assurance that V-ONE's
competitors will not develop products that are superior to those developed by
V-ONE or adapt more quickly than V-ONE to new technologies or evolving industry
trends. Increased competition may result in price reductions, reduced gross
margins or loss of market share, any of which could have a material adverse
effect on V-ONE's revenue stream. There is no assurance that V-ONE will be able
to compete effectively against current or future competitors.
RISK OF ERRORS, FAILURES AND PRODUCT LIABILITY COULD AFFECT MARKET
ACCEPTANCE OF V-ONE'S PRODUCTS.
The complex nature of V-ONE's software products can make the detection of
errors or failures difficult when products are introduced. If errors or failures
are subsequently discovered, this may result in delays, lost revenues, lost
customers during the correction process, damage to V-ONE's reputation and claims
and damages against V-ONE. A malfunction or the inadequate design of V-ONE's
products could result in tort or warranty claims. V-ONE generally attempts to
reduce the risk of such losses to itself and to the companies from which it
licenses technology through warranty disclaimers and liability limitation
clauses in its license agreements. V-ONE may not have obtained adequate
contractual protection in all instances or where otherwise required under
agreements V-ONE has entered into with others. In addition, these measures may
not be effective in limiting V-ONE's liability to end users and to the companies
from which V-ONE licenses technology. V-ONE currently has liability insurance.
However, V-ONE's insurance coverage may not be adequate and any product
liability claim against V-ONE for damages resulting from security breaches could
be substantial. In addition, a well-publicized actual or perceived security
breach could adversely affect V-ONE's customer relationships and the market's
perception of security products in general or V-ONE's products in particular.
RISK OF DEVELOPMENT DELAYS COULD AFFECT V-ONE'S ABILITY TO MEET DELIVERY
SCHEDULES.
V-ONE may experience delays in software development triggered by factors
such as insufficient staffing or the unavailability of development-related
software, hardware or technologies. Further, when developing new software
products, V-ONE's schedules may be altered as a result of changes to the product
specifications in response to customer requirements, market developments,
performance problems or V-ONE-initiated changes. In the past, alterations to the
in-process development of a product have caused delays in the product's
development schedule and have adversely affected V-ONE's ability to timely
provide enhancements for the product. When developing complex software products,
the technology market may shift during the development cycle, requiring V-ONE
either to enhance or change a product's specifications. All of these factors may
cause a product to enter the market behind schedule, which may adversely affect
4
market acceptance of the product or place it at a disadvantage to a competitor's
product that has already gained market share or market acceptance during the
delay.
RISKS RELATING TO EVOLVING DISTRIBUTION CHANNELS COULD HINDER MARKETING
INITIATIVES.
V-ONE relies on its direct sales force and its channel distribution
strategy for the sale and marketing of its products. V-ONE's sales and marketing
organization may be unable to successfully compete against the more extensive
and well-funded sales and marketing operations of certain of its current and
future competitors. V-ONE's distribution strategy involves the development of
relationships with resellers and international distributors and the
implementation of strategic partnering initiatives to enable V-ONE to achieve
broad market penetration. However, V-ONE may be unable to complete strategic
partnering initiatives or continue to attract integrators and resellers that
will be able to market V-ONE's products effectively and that will be qualified
to provide timely and cost-effective customer support and service. V-ONE ships
products to distributors, integrators and resellers on receipt of a purchase
order, and its distributors, integrators and resellers generally carry competing
product lines. Current distributors, integrators and resellers may not continue
to represent V-ONE's products. The inability to recruit, or the loss of,
important sales personnel, distributors, integrators or resellers could hinder
V-ONE's marketing initiatives and its ability to achieve broader market
penetration.
RISKS ASSOCIATED WITH LONG SALES CYCLE MAKE IT DIFFICULT TO PREDICT
RESULTS.
The sales cycle associated with V-ONE's products is lengthy due to a
number of significant risks over which V-ONE has little or no control. While it
varies from sale to sale, the average length of V-ONE's sales cycle can be six
months or more. As a result, V-ONE finds it difficult to predict quarterly
results, and order backlog, if any, at the beginning of any period may represent
only a small portion of that period's expected revenues. As a result, product
revenues in any period will be substantially dependent on orders booked and
registered in that period.
MARKET VOLATILITY COULD AFFECT V-ONE'S STOCK PRICE.
The market price of V-ONE's Common Stock could be subject to significant
fluctuations in response to variations in quarterly operating results and other
factors, such as announcements of new products by V-ONE or its competitors and
changes in financial estimates by securities analysts or other events. Moreover,
the stock market has experienced extreme volatility that has particularly
affected the market prices of equity securities of many technology companies and
that has often been unrelated and disproportionate to the operating performance
of such companies. Broad market fluctuations, as well as economic conditions
generally and in the software industry specifically, may adversely affect the
market price of V-ONE's Common Stock.
V-ONE DEPENDS ON KEY PERSONNEL WHO WOULD BE DIFFICULT TO REPLACE.
V-ONE's success depends, to a large extent, upon the performance of its
senior management and its technical, sales and marketing personnel. There is
intense competition in the software security industry to hire and retain
qualified personnel. V-ONE's success will depend upon its ability to retain and,
if necessary, hire additional key personnel. The loss of key personnel or the
inability to attract additional qualified personnel could materially and
adversely affect V-ONE's results of operations and product development efforts.
V-ONE has entered into an employment agreement with Margaret E. Grayson, its
President and Chief Executive Officer, that provides for fixed terms of
employment. However, V-ONE has not historically provided such types of
employment agreements to its other employees. This practice may adversely affect
V-ONE's ability to attract and retain the necessary technical, management and
other key personnel.
WHERE YOU CAN FIND MORE INFORMATION
A Registration Statement on Form S-2 ("Registration Statement") under the
Securities Act of 1933 relating to the securities offered by this prospectus has
been filed by V-ONE with the SEC in Washington, DC. This prospectus does not
contain all of the information set forth in the Registration Statement and its
exhibits and schedules. Some financial and other information relating to V-ONE
is contained in the documents indicated below under "Incorporation of Certain
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Documents by Reference." This information is not presented in this prospectus.
For further information with respect to V-ONE and the securities offered by this
prospectus, reference is made to such Registration Statement, exhibits and
schedules.
Statements contained in this prospectus as to the contents of any contract
or other document summarize only the material terms and provisions of such
contracts or other documents. In each instance, reference is made to the copy of
such contract or other document filed as exhibits to the Registration Statement,
each such statement being qualified in all respects by such reference.
Copies of the Registration Statement may be inspected without charge or
may be obtained from the SEC upon the payment of certain fees prescribed by the
SEC at the public reference facilities maintained by the SEC in Washington, DC
at Judiciary Plaza, 450 Fifth Street, NW, Washington, DC.
V-ONE is subject to the informational requirements of the Securities
Exchange Act of 1934. Accordingly, V-ONE files periodic reports, proxy
statements and other information with the SEC. Such reports, proxy statements
and other information concerning V-ONE may be inspected or copied at the public
reference facilities at the SEC located at 450 Fifth Street, NW, Washington, DC
20549. Information on the operation of the Public Reference Room may be obtained
by calling the SEC at 1-800-SEC-0330. Copies of such documents can be obtained
at the Public Reference Room of the SEC at 450 Fifth Street, NW, Washington, DC
20549, at prescribed rates or by reference to V-ONE on the SEC's Worldwide Web
page (http://www.sec.gov).
DOCUMENTS DELIVERED WITH THIS PROSPECTUS
This prospectus is accompanied by a copy of V-ONE's Annual Report on Form
10-K for the fiscal year ended December 31, 2003 and Quarterly Report on Form
10-Q for the quarter ended September 30, 2004. The information in this
prospectus should be read together with the accompanying reports.
6
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by V-ONE with the SEC, are
incorporated in this prospectus by reference:
(1) V-ONE's Annual Report on Form 10-K for the year ended December 31,
2003;
(2) V-ONE's Quarterly Report on Form 10-Q for the quarter ended March 31,
2004;
(3) V-ONE's Quarterly Report on Form 10-Q for the quarter ended June 30,
2004;
(4) V-ONE's Current Report on Form 8-K filed March 5, 2004;
(5) V-ONE's Current Report on Form 8-K filed May 20, 2004;
(6) V-ONE's Current Report on Form 8-K filed August 11, 2004
(7) V-ONE's Current Report on Form 8-K filed September 29, 2004;
(8) V-ONE's Current Report on Form 8-K filed November 15, 2004;
(9) V-ONE's Quarterly Report on Form 10-Q for the quarter ended September
30, 2004; and
(10) All other reports filed by V-ONE pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 since December 31, 2003.
V-ONE will provide without charge to each person to whom this prospectus
is delivered, including any beneficial owner, upon the written or oral request
of such person, a copy of any or all of the foregoing documents referred to
above that have been incorporated in this prospectus by reference but have not
been delivered with this prospectus. Exhibits to such documents will not be
provided (unless such exhibits are specifically incorporated by reference into
the information that this prospectus incorporates). Requests for such documents
should be directed to: V-ONE Corporation, 20300 Century Boulevard, Suite 200,
Germantown, Maryland 20874, Attention: Margaret E. Grayson, President and Chief
Executive Officer. Ms. Grayson's telephone number is (301) 515-5246.
SELLING STOCKHOLDERS
In the closing of the private placement of the 7% Notes on February 27,
2004, V-ONE granted registration rights to the purchasers of the 7% Notes
whereby V-ONE is obligated, in certain instances, to register the shares of
Common Stock issuable upon conversion of the 7% Notes and exercise of the
warrants granted in connection with the offering of the 7% Notes. For a detailed
description of the terms of the 7% Notes and warrants, refer to the discussion
of "7% Subordinated Convertible Notes" in the Description of Securities section
of this prospectus on page 12.
The following table sets forth the names of the stockholders selling
shares of Common Stock in this offering, the number of shares of Common Stock
beneficially owned by each selling stockholder as of September 30, 2004 (except
as noted below) and the number of shares of Common Stock that may be offered for
sale pursuant to this prospectus by each such selling stockholder.
The selling stockholders own their shares either in the form of (i) 7%
Notes convertible into shares of Common Stock or (ii) warrants to purchase
shares of Common Stock. In some instances, the shares offered pursuant to this
prospectus may be sold by the pledgees, donees or transferees of or other
successors in interest to the selling stockholders. Except as set forth below,
none of the selling stockholders has held any position, office or other material
relationship with V-ONE or any of its affiliates within the past three years
other than as a result of the transaction that results in its ownership of
shares of Common Stock.
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The shares may be offered from time to time by the selling stockholders
named below. However, the selling stockholders are under no obligation to sell
all or any portion of such shares, nor are the selling stockholders obligated to
sell any such shares immediately pursuant to the Registration Statement. Because
the selling stockholders may sell all or part of their shares, no estimate can
be given as to the number of shares of Common Stock that will be held by any
selling stockholder after termination of any offering made by this prospectus.
COMMON STOCK BENEFICIALLY
OWNED AFTER OFFERING IF
ALL OFFERED SHARES ARE SOLD (1)
-------------------------------
SHARES OF COMMON
STOCK
BENEFICIALLY COMMON STOCK PERCENT OF
NAME OF SELLING OWNED PRIOR TO OFFERED NUMBER OUTSTANDING
STOCKHOLDER OFFERING HEREBY(2) OF SHARES SHARES
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Aaron Lehmann 100,000 100,000 0 *
Ari J. Fuchs 2,500 2,500 0 *
Brad Reifler 2,187 2,187 0 *
Burnham Hill Holdings LLC(3) 187,500 187,500 0 *
Chris Kamberis 100,000 100,000 0 *
Congregation Mishkan Sholom(4) 250,000 250,000 0 1.1%
Daniel H. Schneiderman(5) 38,750 38,750 0 *
David Wiener Revocable Trust-96(6) 125,000 125,000 0 *
Eric B. Eisenberg 100,000 75,000 25,000 *
Glenn D. Porter 5,000 5,000 0 *
Hilary Bergman 21,87 2,187 0 *
H. C. Wainwright & Co., Inc. 191,625 191,625(7) 0 *
Iroquois Capital, LP(8) 500,000 500,000 0 2.1%
James H. Caplan 200,000 150,000 50,000 *
James R. Kuster(9) 125,000 125,000 0 *
Jason Adelman 14,376 14,376 0 *
Jeffrey Haltman & Donna Haltman 125,000 125,000 0 *
JTWROS
Jimmie L. Sundstrom 177,937 177,937 0 *
John R. Clarke 10,000 10,000 0 *
John Jay Gebhardt(10) 125,000 125,000 0 *
Jonathan Spencer & Joni Spencer 125,000 125,000 0 *
Jordan Berlin 10,000 10,000 0 *
Kennebec Resources Inc.(11) 260,000 260,000 0 1.1%
Leo Flotron 250,000 250,000 0 1.1%
8
COMMON STOCK BENEFICIALLY
OWNED AFTER OFFERING IF
ALL OFFERED SHARES ARE SOLD (1)
-------------------------------
SHARES OF COMMON
STOCK
BENEFICIALLY COMMON STOCK PERCENT OF
NAME OF SELLING OWNED PRIOR TO OFFERED NUMBER OUTSTANDING
STOCKHOLDER OFFERING HEREBY(2) OF SHARES SHARES
-------------------------------------------------------------------------------------------------
Lon E. Bell 250,000 250,000 0 1.1%
Marital Trust GST Subject u/w/o 250,000 250,000 0 1.1%
Leopold Salkind(12)
Mark A. Quinn(13) 100,075 100,000 75 *
Mark Capital LLC(14) 250,000 250,000 0 1.1%
Matthew Balk 25,000 25,000 0 *
Nicholas Castronuovo Jr. 100,000 100,000 0 *
Northbar Capital, Inc.(15) 125,000 125,000 0 *
Patricia A. Buchauer 62,500 62,500 0 *
Richard K. Abbe 350,000 350,000 0 1.5%
Richard Reiss 352,500 300,000 52,500 1.5%
Robert J. Neborsky, MD, Inc.(16) 125,000 125,000 0 *
Combination Retirement Trust
Robert L. Hermanos 125,000 125,000 0 *
Robert Nathan(17) 252,937 252,937 0 1.1%
Scot Cohen 400,000 400,000 0 1.7%
Sherbrooke PTNRS LLC(18) 187,500 187,500 0 *
Vertical Ventures, LLC(19) 375,000 375,000 0 1.6%
WEC Partners LLC(20) 250,000 250,000 0 1.1%
Wilson Craig 150,000 150,000 0 *
-------------------
* Less than 1%.
(1) Assumes the sale of all shares.
(2) Unless otherwise indicated, consists of shares issuable upon the conversion of 7% Notes
and the exercise of detachable warrants. Does not include shares payable as estimated
accrued interest on the 7% Notes.
(3) The managing member of Burnham Hill Holdings LLC is Cass Gunther Adelman. Burnham Hill
Holdings LLC is a broker dealer affiliate.
(4) The Chief Financial Officer of Congregation Mishkan Sholom is Menachem Lipskier, who has
sole voting and dispositive power over the shares held by Congregation Mishkan Sholom.
9
(5) A broker-dealer affiliate.
(6) The trustee of the David Wiener Revocable Trust - 96 is David Wiener.
(7) Consists of shares issuable upon the exercise of warrants granted to placement agent in
connection with the 7% Notes offering.
(8) The General Partner of Iroquois Capital LP is Joshua Silverman.
(9) A broker-dealer affiliate.
(10) A broker-dealer affiliate.
(11) The chief executive officer of Kennebec Resources, Inc. is Richard Solomon, who has sole
voting and dispositive power over the shares held by of Kennebec Resources, Inc.
(12) The trustee of the Marital Trust GST Subject u/w/o Leopold Salkind is Gene Salkind, MD.
(13) A broker-dealer affiliate.
(14) The managing member of Mark Capital LLC is Evan M. Levine.
(15) The Vice President of Northbar Capital, Inc. is Jared Shaw, who has sole voting and
dispositive power over the shares held by Northbar Capital, Inc.
(16) The trustee of the Robert J. Neborsky, MD, Inc. Combination Retirement Trust is Robert J.
Neborsky, MD.
(17) A broker-dealer affiliate.
(18) The sole managing partner of Sherbrooke PTNRS LLC is Matthew Balk, who is employed by
Burnham Hill Holdings LLC, a division of Pali Capital, Inc., a registered broker dealer.
(19) The Managing Partner of Vertical Ventures, LLC is Joshua Silverman.
(20) The managing members of WEC Partners LLC are Ethan Benovitz, Daniel Saks and Jaime
Hartman, who share equally the voting and dispositive power over the shares held by WEC
Partners LLC.
From time to time, the selling stockholders may transfer, pledge, donate
or assign their shares to lenders, family members and others and upon acquiring
the shares, such persons will be deemed to be selling stockholders for purposes
of this prospectus. The number of shares beneficially owned by the selling
stockholders who so transfer, pledge, donate or assign shares will decrease as
and when they take such actions. The plan of distribution for shares sold
hereunder will otherwise remain unchanged, except that the transferees,
pledgees, donees or other successors will be selling stockholders hereunder.
USE OF PROCEEDS
There will be no proceeds to V-ONE from the sale of the shares by the
selling stockholders. Any proceeds from the sales of Common Stock received by
the selling stockholders will be retained by the selling stockholders.
V-ONE will pay substantially all of the expenses incident to the
registration, offering and sale of the shares to the public other than
commissions or discounts of underwriters, broker-dealers or agents and the
expenses of counsel to the selling stockholders. Such expenses are estimated to
be approximately $33,000. V-ONE has also agreed to indemnify the selling
stockholders against certain liabilities, including liabilities under the
Securities Act of 1933.
10
PLAN OF DISTRIBUTION
The shares are being offered on behalf of the selling stockholders, and
V-ONE will not receive any proceeds from this offering. See "Use of Proceeds."
The shares may be sold or distributed from time to time by the selling
stockholders, or by pledgees, donees or tranferees of, or other successors in
interest to, the selling stockholders, directly to one or more purchasers
(including pledgees) or through brokers, dealers or underwriters who may act
solely as agents or may acquire shares as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices, or at fixed prices, which may be changed.
The distribution of the shares may be effected in one or more of the
following methods:
o ordinary brokers' transactions, which may include long or short sales
o transactions involving cross or block trades or otherwise on the "Pink
Sheets" or on any other stock exchange or trading facility on which the
Common Stock may be trading
o purchases by brokers, dealers or underwriters as principals and resale
by such purchasers for their own accounts pursuant to this prospectus
o "at the market" to or through market makers or into an existing market
for the Common Stock
o in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected through
agents
o through transactions in options, swaps or other derivatives (whether
exchange-listed or otherwise) or
o any combination of the foregoing, or by any other legally available
means.
In addition, the selling stockholders or their successors in interest may
enter into hedging transactions with broker-dealers who may engage in short
sales of shares of Common Stock in the course of hedging the positions they
assume with the selling stockholders. The selling stockholders or their
successors in interest may also enter into options or other transactions with
broker-dealers that require the delivery by such broker-dealers of the shares.
Those shares may be resold thereafter pursuant to this prospectus.
In addition, the selling stockholders from time to time may sell short the
Common Stock of V-ONE. In such instances, this prospectus may be delivered in
connection with such short sales and the shares may be used to cover such short
sales. Any or all of the sales or other transactions involving the shares
described above may be made pursuant to this prospectus, whether effected by the
selling stockholders, any broker-dealer or others. In addition, any shares that
qualify for sale pursuant to Rule 144 under the Securities Act of 1933 may be
sold under Rule 144 rather than pursuant to this prospectus. The shares may also
be offered in one or more underwritten offerings, on a firm commitment or best
efforts basis.
Brokers, dealers, underwriters or agents participating in the distribution
of the shares as agents may receive compensation in the form of commissions,
discounts or concessions from the selling stockholders and/or purchasers of the
shares for whom such broker-dealers may act as agent, or to whom they may sell
as principal, or both. The compensation as to a particular broker-dealer may be
less than or in excess of customary commissions. The selling stockholders and
any broker-dealers who act in connection with the sale of shares hereunder may
be deemed to be "underwriters" within the meaning of the Securities Act of 1933,
and any commissions they receive and proceeds of any sale of shares may be
deemed to be underwriting discounts and commissions under the Securities Act of
1933. Neither V-ONE nor any selling stockholder can presently estimate the
amount of such compensation. V-ONE knows of no existing arrangements between any
selling stockholder and any other stockholder, broker, dealer, underwriter or
agent relating to the sale or distribution of the shares.
Under applicable rules and regulations under the Securities Exchange Act
of 1934, any person engaged in the distribution of the shares may not
simultaneously engage in market making activities with respect to V-ONE's Common
11
Stock for a period of one business day prior to the commencement of such
distribution and ending upon such person's completion of participation in the
distribution, subject to certain exceptions for passive market making
transactions. In addition and without limiting the foregoing, the selling
stockholders will be subject to applicable provisions of the Securities Exchange
Act of 1934 and the rules and regulations thereunder, including, without
limitation, Regulation M, which provisions may limit the timing of purchases and
sales of shares of Common Stock by the selling stockholders.
At the time a particular offer of shares is made, to the extent required,
a supplemental prospectus will be distributed that will set forth the number of
shares being offered and the terms of the offering including the name or names
of the selling stockholders and any underwriters, dealers or agents, the
purchase price paid by an underwriter for the shares purchased from the selling
stockholders and any discounts, concessions or commissions allowed or reallowed
or paid to dealers.
In order to comply with the securities laws of some states, if applicable,
the shares may be sold in such jurisdictions only through registered or licensed
brokers or dealers.
DESCRIPTION OF SECURITIES
GENERAL
V-ONE is authorized to issue up to 75,000,000 shares of Common Stock,
$0.001 par value per share, and 13,333,333 shares of preferred stock, $0.001 par
value per share.
The following summary of certain provisions of V-ONE's Common Stock and
preferred stock contains only the material provisions of V-ONE's capital stock,
the complete provisions of which may be found in and are subject to V-ONE's
Restated Certificate of Incorporation and Restated Bylaws and are subject to the
provisions of applicable law.
COMMON STOCK
As of November 15, 2004, there were 15,642,555 shares of Common Stock
outstanding that were held of record by approximately 226 stockholders.
The holders of Common Stock are entitled to one vote for each share held
of record on all matters submitted to a vote of stockholders. Dividends, if any,
may be declared by the Board of Directors out of funds legally available for the
payment of dividends. Dividends may be paid in cash, in property or in shares of
capital stock. In the event of any voluntary or involuntary liquidation, sale,
or winding up of V-ONE, the holders of Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities, including, but not
limited to, notes of V-ONE, and liquidation preferences of any outstanding
shares of preferred stock. Holders of Common Stock have no preemptive rights to
subscribe for any of V-ONE's securities or rights to convert their Common Stock
into any other securities. There are no redemption or sinking fund provisions
applicable to the Common Stock.
PREFERRED STOCK
V-ONE's Board of Directors has the authority to issue up to 13,333,333
shares of preferred stock in one or more series and to fix the rights,
preferences, privileges and restrictions thereof, including dividend rights,
conversion rights, voting rights, terms of redemption, liquidation preferences
and the number of shares constituting any series or the designation of such
series, without any further vote or action by shareholders. The issuance of
preferred stock may have the effect of delaying or preventing a change in
control of V-ONE. V-ONE currently has 42,904 shares of Series C Preferred Stock
("Series C Shares") outstanding and 1,510,500 shares of Series D Convertible
Preferred Stock ("Series D Shares") outstanding.
12
Series C Preferred Stock
------------------------
On September 9, 1999, V-ONE issued 335,000 Series C Shares and
non-detachable warrants to purchase 3,350,000 shares of Common Stock ("Series C
Warrants"). Each Series C Share was issued with a Series C Warrant to purchase
ten shares of Common Stock. The Series C Warrants were immediately exercisable
at a price of $2.625 per share and remain exercisable until 90 days after all of
the Series C Shares have been redeemed and the shares of the Common Stock
underlying the Series C Warrants have been registered for resale. On May 14,
2004, V-ONE effected a 1:2 reverse stock split modifying the number of
non-detachable warrants to 1,675,000 and the exercise price to $5.25 per share.
The Series C Shares bear cumulative compounding dividends at an annual
rate of 10.0% for the first five years, 12.5% for the sixth year and 15.0% in
and after the seventh year. The dividends may be paid in cash, or at the option
of V-ONE, in shares of registered Common Stock. The Series C Shares are not
convertible and rank senior to the Common Stock and Series D Shares as to
payment of dividends and distributions of assets upon liquidation, dissolution
or winding up of V-ONE. Holders of the Series C Shares are entitled to a
liquidation preference of $26.25 per share. There are no sinking fund provisions
applicable to the Series C Shares.
At least 51.0% of the outstanding Series C Shares must vote affirmatively
as a separate class for (i) the voluntary liquidation, dissolution or winding up
of V-ONE, (ii) the issuance of any securities senior to the Series C Shares,
(iii) the declaration or payment of a cash dividend on all junior stocks and
(iv) certain amendments to V-ONE's Certificate of Incorporation and Bylaws.
Prior to the exercise of the Series C Warrants, the holders of Series C Shares
are entitled to ten common votes for each Series C Share on all matters on which
common stockholders are entitled to vote, except in connection with the election
of the Board of Directors. As long as at least 51.0% of the Series C Shares are
outstanding, the holders shall have the right to elect one director to V-ONE's
Board of Directors.
V-ONE has the right to redeem the outstanding Series C Shares in whole (i)
at any time after the third anniversary of the issuance date, (ii) upon the
closing of an underwritten public offering in excess of $20 million and at a
price in excess of $6.50 per share or (iii) prior to the third anniversary of
the issuance date if the average closing bid price of the Common Stock for any
20 trading days during any 30 trading days ending within five trading days prior
to the date of notice of redemption is at least $3.9375 per share. The
redemption price will be paid in cash in full and will be equal to the greater
of $52.50 per share (giving effect to V-ONE's 1:2 reverse stock split effected
on May 14, 2004) or the fair market value of each Series C Share plus all unpaid
dividends.
At any time after all of the Series C Warrants have been exercised by a
holder, that holder shall have the right to require V-ONE to redeem all of its
then outstanding Series C Shares. The redemption price for each Series C Share
is $52.50 per share (giving effect to V-ONE's 1:2 reverse stock split effected
on May 14, 2004) plus all unpaid dividends and is payable at the option of V-ONE
in either cash or shares of Common Stock.
Series D Convertible Preferred Stock
------------------------------------
On February 14, 2001, V-ONE issued 3,675,000 Series D Shares and
detachable warrants to purchase 735,000 shares of Common Stock ("Series D
Warrants"). The Series D Shares were sold in units, with each unit consisting of
five Series D Shares and a Series D Warrant to purchase one share of Common
Stock. The Series D Warrants were exercisable at a price of $2.29 per share and
were exercisable through February 14, 2004.
The Series D Shares bear cumulative compounding dividends at an annual
rate of 10.0% for the first five years, 12.5% for the sixth year and 15.0% in
and after the seventh year. The dividends may be paid in cash, or at the option
of V-ONE, in shares of registered Common Stock. The Series D Shares are
convertible at any time into shares of Common Stock at the initial conversion
price of $1.91 and the initial conversion ratio of one Series D Share for one
share of Common Stock. Both the conversion price and conversion ratio are
subject to equitable adjustment for stock splits, stock dividends, combinations,
and similar transactions, and in the event V-ONE issues shares of Common Stock
at a purchase price less than the then current conversion price. On May 14,
2004, V-ONE effected a 1:2 reverse stock split modifying the conversion price to
$3.82 per share. The Series D Shares will be automatically converted into Common
Stock upon the closing of an underwritten public offering in excess of $20
million and at a price in excess of $3.00 per share
13
The Series D Shares rank senior to the Common Stock and junior to the
Series C Shares as to payment of dividends and distribution of assets upon
liquidation, dissolution or winding up of V-ONE. Holders of the Series D Shares
are entitled to a liquidation preference equal to the greater of (i) $1.91 plus
any unpaid accrued preferred dividends and (ii) the dollar value per share for
the Series D Shares that a holder of such shares would have been entitled to
receive had such shares been converted into Common Stock immediately prior to
the liquidation, dissolution or winding up of V-ONE. On May 14, 2004, V-ONE
effected a 1:2 reverse stock split modifying the liquidation preference to the
greater of $3.82 plus any unpaid accrued preferred dividends and (ii) the dollar
value per share for the Series D Shares that a holder of such shares would have
been entitled to receive had such shares been converted into Common Stock
immediately prior to the liquidation, dissolution or winding up of V-ONE. There
are no sinking fund provisions applicable to the Series D Shares.
Except as to matters addressed in the next sentence, the holders of the
Series D Shares have the right to vote that number of shares equal to the number
of shares of Common Stock issuable upon the conversion of their Series D Shares
and vote together with the holders of Common Stock as a single class. For so
long as at least 51.0% of the number of Series D Shares outstanding on February
14, 2001 remains outstanding, the affirmative vote or consent of the holders of
at least 51.0% of the then outstanding number of Series D Shares, voting
separately as a class, is required for (i) the voluntary liquidation,
dissolution or winding up of V-ONE, (ii) the issuance of any securities senior
to or on parity with the Series D Shares, (iii) the declaration or payment of a
cash dividend on all junior stocks and (iv) certain amendments to V-ONE's
Certificate of Incorporation and Bylaws.
V-ONE has the right to redeem the outstanding Series D Shares in whole at
any time after February 14, 2004. The redemption price will be paid in cash in
full and be the greater of $1.91 per share or the fair market value of each
Series D Share plus all unpaid dividends. On May 14, 2004, V-ONE effected a 1:2
reverse stock split modifying the redemption price to be the greater of $3.82
per share or the fair market value of each Series D Share plus all unpaid
dividends.
Beginning on February 14, 2007, and for each of the next three years
thereafter, the holders of Series D Shares will have the cumulative right to
require V-ONE to redeem annually up to one-fourth of the Series D Shares issued
by V-ONE to each such holder. The redemption right can be settled through the
issuance of Common Stock, at the option of V-ONE. The redemption price for each
Series D Share is $1.91 per share plus all unpaid dividends. On May 14, 2004,
V-ONE effected a 1:2 reverse stock split modifying the redemption price for each
Series D Share to be $3.82 per share plus all unpaid dividends.
Dividends Payable on Preferred Stock
------------------------------------
The table below addresses the effect that certain future fluctuations in
the market price of V-ONE Common Stock will have on the number of shares of
Common Stock payable as dividends on the Series C and Series D Shares.
------------------------------------------------------------------------------------------------
Number of Shares of Common Stock
Payable as Dividends on Preferred Stock
--------------------------------------------------------------
Market Price
Dividends at November 25% Decrease 50% Decrease 75% Decrease
Accrued 15, 2004 $0.06 $0.04 $0.02
$0.08
------------------------------------------------------------------------------------------------
Outstanding
Series C $1,856,347 23,204,338 30,939,117 46,408,675 92,817,350
Preferred Stock
------------------------------------------------------------------------------------------------
Outstanding
Series D $2,608,318 32,603,975 43,471,967 65,207,950 130,415,900
Preferred Stock
------------------------------------------------------------------------------------------------
14
8% Secured Convertible Notes
----------------------------
In closings on July 23 and 26 and August 2, 2002, V-ONE issued 8% Secured
Convertible Notes ("8% Notes") with detachable warrants for an aggregate
principal amount of $1,188,000. The 8% Notes mature 180 days after issuance with
an additional 180-day extension available at the option of the Company or the
holders. The rate of interest payable during such extension of the 8% Notes is
10% per annum. All of the 8% Notes have been converted to shares of common
stock.
In connection with the 8% Notes offering, V-ONE issued detachable warrants
to purchase 1,188,000 shares of Common Stock to provide 100% warrant coverage to
the holders of the 8% Notes. The initial exercise price of the warrants is $0.50
per share and they are exercisable for a period beginning six months after
issuance and ending five years after issuance. V-ONE will have the right to
require the exercise of the warrants if the closing sales price of V-ONE Common
Stock is equal to or greater than $6.00 per share (giving effect to V-ONE's 1:2
reverse stock split effected on May 14, 2004) for any consecutive 20 trading
days and the shares of Common Stock underlying the warrants have been registered
under the Securities Act of 1933.
The exercise price and number of shares of Common Stock to be issued upon
exercise of the warrants are subject to equitable adjustment in the event of
stock dividends, stock splits and similar events affecting the Common Stock. In
addition, if V-ONE issues any shares of Common Stock or equivalents at a
purchase price less than the then current market price of the Common Stock or
the warrant exercise price, the exercise price will be equitably reduced, and
number of shares of Common Stock to be issued upon exercise of the warrants
adjusted accordingly.
Also in connection with the 8% Notes offering, V-ONE granted warrants to
purchase a total of 336,750 shares of Common Stock to Joseph Gunnar & Co., LLC
and LaSalle St. Securities, LLC, placement agent and subagent, respectively, for
the 8% Notes offering. The terms of the placement agent warrants mirror those of
the detachable warrants granted in connection with the 8% Notes offering.
In connection with its efforts to raise capital, V-ONE agreed in January
2003 to adjust the exercise price of the warrants from $.50 per share to $.15
per share. On May 14, 2004, V-ONE effected a 1:2 reverse stock split modifying
the exercise price to $.30 per share and the number of shares of Common Stock to
452,977. As of September 30, 2004, there were warrants outstanding to purchase
905,954 shares of Common Stock.
7% Subordinated Convertible Notes
---------------------------------
In a closing on February 27, 2004, V-ONE issued 7% Subordinated
Convertible Notes ("7% Notes") with warrants for an aggregate principal amount
of $1,200,000, resulting in net proceeds to V-ONE of $1,065,690. The 7% Notes
mature on February 27, 2009. Interest at the rate of 7% per annum is payable
semi-annually at the option of V-ONE in cash or in shares of Common Stock. The
7% Notes rank senior to the Common Stock and junior to the Series C Shares and
Series D Shares as to the payment of dividends and as to distribution of assets
upon liquidation, dissolution or winding up of V-ONE. So long as at least
$500,000 of the principal amount of the 7% Notes is outstanding, the affirmative
vote of the holders of at least 75% of the principal amount of the 7% Notes
outstanding is required to issue any securities that rank senior to or on parity
with the 7% Notes.
Under the original terms of the 7% Notes, the holders could convert the
principal amount of their 7% Notes, in whole or in part, at any time into shares
of Common Stock at a conversion price of $0.20 per share. On May 14, 2004, V-ONE
effected a 1:2 reverse stock split modifying the original conversion price of
the 7% Notes to $0.40 per share. In addition, subject to certain terms, the
principal amount of the 7% Notes plus all accrued and unpaid interest shall
automatically convert into shares of Common Stock at the then current conversion
price on the earlier of (i) February 27, 2009 and (ii) the first date which is
at least 180 days following the effective date of the Registration Statement
providing for the resale of the shares of Common Stock issuable upon conversion
of the 7% Notes that the closing bid price of V-ONE Common Stock exceeds $1.00
for a period of 20 consecutive trading days. On May 14, 2004, V-ONE effected a
1:2 reverse stock split modifying the closing bid price to $2.00 per share.
An event of default will occur if V-ONE fails to make any principal
payment under the 7% Notes, V-ONE fails to make any interest payment for a
period of five days after such payment is due, V-ONE fails to timely file the
Registration Statement providing for the resale of the shares of Common Stock
issuable upon conversion of the 7% Notes or the Registration Statement is not
declared effective by the SEC within 180 days of February 27, 2004, the
effectiveness of the Registration Statement lapses for a period of 20
consecutive trading days, or upon the occurrence of other default events,
including, but not limited to, an assignment for the benefit of creditors, an
application for the appointment of a trustee or receiver or the commencement of
a bankruptcy proceeding. In such events of default, the 7% Note holders may
demand that the Company pay interest on the outstanding principal balance of the
7% Notes at the lesser of 12% and the maximum applicable legal rate per annum
from the date of the event of default until such default is cured. If such
events of default continue, the 7% Note holders may at their option, (i) declare
the entire unpaid principal balance of the 7% Notes, together with accrued and
unpaid interest, due and payable, (ii) demand that the principal amount of the
7% Notes then outstanding and all accrued and unpaid interest thereon be
converted into shares of Common Stock, or (iii) exercise or otherwise enforce
any one or more of their rights under the 7% Notes and related agreements.
Upon the occurrence of certain events of default and other triggering
events, a 7% Note holder shall have the right to require V-ONE to prepay in cash
all or a portion of the holder's 7% Note at 120% of the aggregate principal
amount of the 7% Note, plus all accrued and unpaid interest. Similar provisions
apply if V-ONE cannot fully convert a 7% Note into shares of registered Common
Stock upon the receipt of a proper conversion notice from the holder. In
addition, in the event of a major corporate transaction such as the
consolidation, merger or other business combination of V-ONE into another entity
or a sale or transfer of more than 50% of V-ONE's assets, the 7% Note holder
shall have the right to require V-ONE to prepay in cash all or a portion of the
holder's 7% Note at 100% of the aggregate principal amount of the 7% Note, plus
all accrued and unpaid interest. If the major corporate transaction is
consummated within six months of the issuance of the 7% Note, then the
prepayment shall be at 110% of the aggregate principal amount of the 7% Note,
plus all accrued and unpaid interest. Also, beginning one year after the
issuance of the 7% Notes, V-ONE may prepay any portion or all of the outstanding
principal balance of the 7% Notes together with all accrued and unpaid interest
at 110% of the aggregate principal amount of the 7% Notes plus any accrued and
unpaid interest.
For twelve months after the issuance of the 7% Notes, each holder shall
have a right of first refusal to purchase its pro rata portion of V-ONE Common
Stock (or any securities convertible, exercisable or exchangeable into Common
Stock) offered to a third party in a private transaction on the same terms as
those offered to the third party, other than in certain permitted financings. If
a holder elects not to exercise its right of first refusal, the other holders
15
may participate on a pro rata basis. If the holders do not participate, V-ONE
may proceed with the transaction with the third party.
In connection with the 7% Notes offering, V-ONE issued detachable warrants
to purchase 6,000,000 shares of Common Stock to the holders of the 7% Notes. The
warrants are exercisable beginning on August 27, 2004 at an exercise price of
$0.25 per share and expire on August 27, 2008. On May 14, 2004, V-ONE effected a
1:2 reverse stock split reducing the number of shares purchasable under the
warrants to 3,000,000 and increasing the exercise price to $0.50. Beginning 180
days after the effective date of a Registration Statement providing for the
resale of the shares of Common Stock issuable upon conversion of the 7% Notes
and exercise of the warrants, V-ONE may call up to 100% of the warrants if the
per share market value of its Common Stock has been greater than $0.75 for a
period of 20 consecutive trading days by issuing a call notice to the warrant
holders. On May 14, 2004, V-ONE effected a 1:2 reverse stock split modifying the
per share market value required for a call of the warrants to $1.50. The rights
and privileges granted to a warrant holder with respect to the shares subject to
the call notice shall expire on the twentieth day after the holder receives the
call notice if the holder does not exercise the warrant. If the holder does not
exercise the warrant, V-ONE shall remit to the warrant holder (i) $0.01 per
share subject to the call notice and (ii) a new warrant representing the number
of shares of Common Stock, if any, which were not subject to the call notice.
The exercise price and number of shares of Common Stock to be issued upon
conversion of the 7% Notes and exercise of the warrants are subject to equitable
adjustment in the event of stock dividends, stock splits and similar events
affecting the Common Stock. In addition, if V-ONE issues any shares of Common
Stock or equivalents at a purchase price less than the then current conversion
price for the 7% Notes or warrant exercise price, the conversion price and
warrant exercise price will be equitably reduced, and number of shares of Common
Stock to be issued upon conversion of the 7% Notes and exercise of the warrants
adjusted accordingly. However, in no event shall the conversion price, or
exercise price in the event of the issuance of V-ONE securities at less than the
current warrant exercise price, be less than $0.15 per share. On May 14, 2004,
V-ONE effected a 1:2 reverse stock split modifying the minimum warrant exercise
price to $0.30 per share.
Also in connection with the 7% Notes offering, V-ONE granted warrants to
purchase up to a total of 1,260,000 shares of Common Stock to H.C. Wainwright &
Co., Inc., placement agent for the 7% Notes offering. As a result of the stock
split effected in May 2004, the shares that may be purchased under warrants
issued to H.C. Wainwright & Co., Inc. have been reduced to 630,000. The
placement agent warrants contain a cashless exercise provision. The other terms
of the placement agent warrants mirror those of the warrants granted in
connection with the 7% Notes offering.
The merger agreement for the Company's anticipated merger with SteelCloud,
Inc. required that the Company's outstanding 7% Notes be cancelled and converted
into the right to receive specified merger consideration and that all related
note instruments be terminated without any obligation of the 7% Note holders or
the Company. In contemplation of the merger, the Company and the 7% Note holders
executed agreements effecting the note cancellation, which agreements provided
that the note cancellation would be void if the merger was not consummated. On
September 28, 2004, the Company and SteelCloud terminated the merger agreement
and consequently, the Company's 7% Notes remain outstanding.
As of September 30, 2004, the Company is in default on the interest
payable on the 7% Notes in the amount of $42,000. The 7% Note holders have not
made any formal claims for payment and the Company currently is seeking an
extension of time for the payment of interest.
The 7% Notes also provide that the Company will be in default if the
Registration Statement providing for the resale of shares of Common Stock
issuable upon conversion of the 7% Notes is not declared effective by the SEC
within 180 days of February 27, 2004. The Company timely filed the Registration
Statement; however, due to unanticipated circumstances, the Registration
Statement was not declared effective by the SEC within 180 days of February 27,
2004.
In such events of default, the 7% Note holders may demand that the Company
pay interest on the outstanding principal balance of the 7% Notes at the lesser
of 12% and the maximum applicable legal rate per annum from the date of the
event of default until such default is cured. If such events of default
continue, the 7% Note holders may at their option, (i) declare the entire unpaid
16
principal balance of the 7% Notes, together with accrued and unpaid interest,
due and payable, (ii) demand that the principal amount of the 7% Notes then
outstanding and all accrued and unpaid interest thereon be converted into shares
of Common Stock, or (iii) exercise or otherwise enforce any one or more of their
rights under the 7% Notes and related agreements. The 7% Note holders have not
made any such demands or declarations.
In addition, because the Registration Statement was not declared effective
by the SEC within 180 days of February 27, 2004, the 7% Note holders may require
the Company to prepay in cash all or a portion of the 7% Notes at a price equal
to 120% of the aggregate principal amount of the 7% Notes, plus all accrued and
unpaid interest. The 7% Note holders have not made any such demands or
declarations.
Upon issuance of the 7% Notes, the Company recorded a debt discount of
approximately $1,200,000 in accordance with the accounting requirements for a
beneficial conversion feature on the 7% Notes. The debt discount was to be
amortized over the 5 year term of the notes indicated by the stated redemption
date. Since the 7% Notes are in default, the holders, may, at their option,
declare the entire unpaid principal balance of the 7% Notes, together with
accrued and unpaid interest, due and payable. As a result of the default, the 7%
Notes no longer have a stated redemption date and the Company is now required to
amortize the debt discount over the period from the date of issuance to the
earliest conversion date. Therefore, the Company has amortized the remaining
debt discount to interest expense as of the date of the default.
During the three and nine months ended September 30, 2004, the Company
amortized $1,118,302 and $1,200,000 of the discount to interest expense,
respectively, related to the 7% Notes. Additionally, the Company recorded
$21,467 in accrued interest expense for the third quarter of 2004.
V-ONE has granted registration rights to the purchasers of the Series C
and Series D Shares and the 7% and 8% Notes whereby V-ONE is obligated, in
certain instances, to register the shares of Common Stock issuable upon
conversion of the Series D Shares and 7% and 8% Notes and exercise of the
warrants attached to the Series C and Series D Shares and 7% and 8% Notes.
17
LEGAL MATTERS
Certain legal matters with respect to the issuance of the shares of Common
Stock offered by this prospectus have been passed upon for V-ONE by Kirkpatrick
& Lockhart LLP, 1800 Massachusetts Avenue, NW, Washington, DC 20036.
EXPERTS
The financial statements and schedule of V-ONE at December 31, 2003 and
2002, appearing in V-ONE's Annual Report (Form 10-K) for the year ended December
31, 2003, have been audited by Aronson & Company, independent auditors, as set
forth in their report thereon (which contains an explanatory paragraph
describing conditions that raise substantial doubt about the Company's ability
to continue as a going concern as described in Note 2 to the financial
statements) included therein and incorporated herein by reference. The financial
statements and schedule of V-ONE for the year ended December 31, 2001 have
been audited by Ernst & Young LLP, independent registered public accounting
firm, as set forth in their report thereon (which contains an explanatory
paragraph describing conditions that raise substantial doubt about the Company's
ability to continue as a going concern as described in Note 2 to the financial
statements) included therein and incorporated herein by reference. Such
financial statements and schedules are incorporated herein by reference in
reliance upon such reports given on the authority of such firms as experts in
accounting and auditing.
18
No dealer, salesperson or any other person is authorized to give any information
or to make any representations in connection with this prospectus and, if given
or made, such information or representations must not be relied upon as having
been authorized by V-ONE. This prospectus does not constitute an offer to sell
or a solicitation of an offer to buy any security other than the securities
offered by this prospectus, or an offer to sell or a solicitation of an offer to
buy any securities by anyone in any jurisdiction in which such offer or
solicitation is not authorized or is unlawful. The delivery of this prospectus
shall not, under any circumstances, create any implication that the information
herein is correct as of any time subsequent to the date of this prospectus.
------------------------
TABLE OF CONTENTS
Page
----
V-ONE CORPORATION..............................................................2
RISK FACTORS...................................................................2
WHERE YOU CAN FIND MORE INFORMATION............................................5
DOCUMENTS DELIVERED WITH THIS PROSPECTUS.......................................6
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................................7
SELLING STOCKHOLDERS...........................................................7
USE OF PROCEEDS...............................................................10
PLAN OF DISTRIBUTION..........................................................11
DESCRIPTION OF SECURITIES.....................................................12
LEGAL MATTERS.................................................................18
EXPERTS.......................................................................18
7,680,000 Shares
V-ONE Corporation
-----------------
COMMON STOCK
----------------
PROSPECTUS
----------------
________________, 2004
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses expected to be incurred by
V-ONE Corporation ("V-ONE") in connection with the sale and distribution of the
shares of Common Stock being registered. With the exception of the registration
fee, all amounts shown are estimates.
SEC registration fee......................... $671.41
Printing and engraving expenses.............. 2,000.00
Legal fees and expenses .....................
20,000.00
Accounting fees and expenses................. 7,500.00
Miscellaneous fees and expenses.............. 3,000.00
-----------
Total................................ $33,171.41
===========
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law, as amended ("DGCL"),
provides that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding, if
the person acted in good faith and in a manner the person reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. Section 145 further provides that a corporation
similarly may indemnify any such person serving in any such capacity who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor, against expenses (including attorneys' fees) actually and
reasonably incurred in connection with the defense or settlement of such action
or suit if the person acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Delaware Court of Chancery or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses that the Court of Chancery or such other court shall
deem proper.
Article Ninth of V-ONE's Amended and Restated Certificate of Incorporation
provides that V-ONE shall indemnify, to the fullest extent now or hereafter
permitted by law, each director, officer, employee or agent (including each
former director, officer, employee or agent) of V-ONE who was or is made party
to or a witness in or is threatened to be made a party to or a witness in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was an authorized representative of V-ONE, against all expenses (including
attorneys' fees and disbursements), judgments, fines (including excise taxes and
penalties) and amounts paid in settlement actually and reasonably incurred by
him in connection with such action, suit or proceeding.
Article VI, Section 6.1 of V-ONE's Amended Bylaws provides that each
person who was or is made a party to or is otherwise involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding") by reason of the fact that he is or was a director,
officer, agent or employee of V-ONE, shall be indemnified and held harmless by
V-ONE to the fullest extent authorized by DGCL, as the same exists or may
hereafter be amended, against any expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement, actually and reasonably
incurred by such person in connection therewith. Notwithstanding the foregoing,
no director shall be indemnified nor held harmless in violation of the
provisions set forth in V-ONE's Amended and Restated Certificate of
Incorporation; and no director, officer, agent or employee shall be indemnified
nor held harmless by V-ONE unless:
(i) In the case of conduct in his/her official capacity with V-ONE,
he/she acted in good faith and in a manner he/she reasonably
believed to be in the best interests of V-ONE;
(ii) In all other cases, his/her conduct was at least not opposed to
the best interests of V-ONE nor in violation of the Amended and
Restated Certificate of Incorporation, Bylaws or any agreement
entered into by V-ONE; and
(iii) In the case of any criminal proceeding, he/she had no reasonable
cause to believe that his/her conduct was unlawful.
Item 16. Exhibits.
Number Description of Exhibit
------ ----------------------
5 Opinion of Kirkpatrick & Lockhart LLP (3)
10.1 Note and Warrant Purchase Agreement dated as of February 27,
2004 (1)
10.2 Registration Rights Agreement dated as of February 27, 2004
(1)
10.3 Form of Subordinated Convertible Note dated February 27,
2004 (2)
10.4 Form of Warrant to Purchase Shares of Common Stock dated
February 27, 2004(2)
23.1 Consent of Aronson & Company
23.2 Consent of Ernst & Young LLP
23.3 Consent of Kirkpatrick & Lockhart LLP (included in Exhibit
5) (3)
24 Power of Attorney (3)
(1) The information required by this exhibit is incorporated herein by
reference to V-ONE's Form 8-K dated March 5, 2004.
(2) The information required by this exhibit is incorporated herein by
reference to V-ONE's Form 10-K for the fiscal year ended December 31, 2003.
(3) Previously filed.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
II-2
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the registration statement is on Form S-3 or Form
S-8, and the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Germantown, State of Maryland, on December 21,
2004.
V-ONE CORPORATION
By: /s/ Margaret E. Grayson
-------------------------------------
Margaret E. Grayson
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
President,
/s/ Margaret E. Grayson Chief Executive Officer,
------------------------- Principal Financial Officer, December 21, 2004
Margaret E. Grayson Principal Accounting Officer
and Director
/s/ Molly G. Bayley
-------------------------
Molly G. Bayley* Director December 21, 2004
/s/ Heidi B. Heiden
-------------------------
Heidi B. Heiden* Director December 21, 2004
/s/ William E. Odom
-------------------------
William E. Odom* Director December 21, 2004
*Signatures affixed by Margaret E. Grayson, attorney in fact.
II-4
EXHIBIT INDEX
Number Description of Exhibit
------ ----------------------
5 Opinion of Kirkpatrick & Lockhart LLP (3)
10.1 Note and Warrant Purchase Agreement dated as of February 27,
2004 (1)
10.2 Registration Rights Agreement dated as of February 27,
2004 (1)
10.3 Form of Subordinated Convertible Note dated February 27,
2004 (2)
10.4 Form of Warrant to Purchase Shares of Common Stock dated
February 27, 2004 (2)
23.1 Consent of Aronson & Company
23.2 Consent of Ernst & Young LLP
23.3 Consent of Kirkpatrick & Lockhart LLP (included in Exhibit
5)(3)
24 Power of Attorney (3)
(1) The information required by this exhibit is incorporated herein by
reference to V-ONE's Form 8-K dated March 5, 2004.
(2) The information required by this exhibit is incorporated herein by
reference to V-ONE's Form 10-K for the fiscal year ended December 31, 2003.
(3) Previously filed.
II-5