UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K

           (Mark One)
                  [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                    FOR FISCAL YEAR ENDED: DECEMBER 31, 2000

                  [ ] 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)

             SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

               SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                    COMMON STOCK, $0.001 PAR VALUE PER SHARE
                    ----------------------------------------
                                (Title of class)

                      TRADED ON THE NASDAQ SMALLCAP MARKET

      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 by check mark if disclosure of delinquent filers pursuant to Item
      405 of Regulation S-K is not contained herein,  and will not be contained,
      to the best of registrant's  knowledge, in definitive proxy or information
      statements  incorporated by reference in Part III of this Form 10-K or any
      amendment to this Form 10-K. [ ]

      The  aggregate  market value of the voting and  non-voting  equity held by
      non-affiliates  computed  by  reference  to the price at which the  common
      equity was sold, or the average bid and asked price of such common equity,


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      as of March 1, 2001 was approximately  $51,500,000.  This calculation does
      not reflect a  determination  that  persons are  affiliates  for any other
      purposes.

      Registrant had 22,215,109,  shares of Common Stock outstanding as of March
      1, 2001.
























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DOCUMENTS INCORPORATED BY REFERENCE

Part III -- Portions of the registrant's definitive proxy statement to be issued
in conjunction with registrant's 2001 annual stockholder's meeting to be held on
May 10, 2001.

FORWARD-LOOKING STATEMENTS

In  addition  to   historical   information,   this   Annual   Report   contains
forward-looking   statements  that  involve  risks  and   uncertainties.   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. Readers are
cautioned not to place undue reliance on these forward-looking statements. V-ONE
Corporation  undertakes no obligation to publicly  revise these  forward-looking
statements  or to reflect  events or  circumstances  that  arise  after the date
hereof.

                                     PART I

ITEM 1.  BUSINESS

V-ONE Corporation  ("V-ONE" or the "Company")  develops,  markets and licenses a
comprehensive  suite of network security products that enables  organizations to
conduct secured  electronic  transactions and information  exchange using public
switched  networks,  such as the  Internet.  The  Company's  suite  of  products
addresses network user  authentication,  perimeter security,  access control and
data integrity  through the use of smart cards,  tokens,  digital  certificates,
firewalls  and  encryption  technology.   The  Company'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.  The Company's  products have been designed with an open and flexible
architecture  to  enhance  application  functionality  and to  support  emerging
network  security  standards.  The products are most  commonly used to establish
very secure Virtual Private Networks (VPNs). In addition, the Company'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.

The Company was incorporated in Maryland in February 1993 and  reincorporated in
Delaware in February 1996.  Effective July 2, 1996, the Company changed its name
from "Virtual Open Network Environment  Corporation" to "V-ONE Corporation." The
Company's  principal  executive offices are located at 20250 Century  Boulevard,
Suite 300,  Germantown,  Maryland 20874. The Company's telephone number is (301)
515-5200.

BACKGROUND

OVERVIEW. Over the last decade,  decentralized computing has emerged as a result
of the widespread adoption of personal  computers,  local area networks and wide
area networks.  This emergence has enabled users to communicate  with each other
and share data throughout an entire organization. With the recent popularization
of the Internet and  increased  performance  capabilities  offered by high-speed
modems,  xDSL and Cable modems,  ISDN services and frame relay  technology,  the
volume of data  transferred  over networks has increased  dramatically.  Fueling
this  expansion   further,   carriers  and  Internet   service   providers  have
dramatically  reduced their tariffs for high-speed  aggregation services running
over T-1 and T-3 lines,  which have data transfer rates that  approximate  local
area network  performance.  In addition,  leading  hardware and software vendors
have adopted and support TCP/IP, the Internet's  non-proprietary  communications
protocol, for computer communications and information exchange.

Organizations  are  increasing  their  dependence  on the  Internet  and private
enterprise  networks using Internet protocols  ("intranets") as a cost-effective
means to expand enterprise networks,  engage in electronic commerce and increase


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information  exchange.  This  pervasive  use  of  the  Internet,  intranets  and
extranets (architecture linking companies with specific customers, suppliers and
trading  partners)  has  increased  the need for  solutions  to  provide  secure
communications because TCP/IP networks are not secure.

The need for internal security continues to grow as businesses deploy extranets,
intranets,   internal  networks  using  TCP/IP   protocols,   and  browser-based
applications  to  facilitate  geographically  dispersed  communications  and the
transmission of information throughout an enterprise in a cost-effective manner.
Information  becomes more vulnerable as  organizations  rely heavily on computer
networks for the electronic  transmission of data. With the increased use of the
Internet and intranets, many organizations are discovering that network security
is a key  element in  successfully  implementing  distributed  applications  and
services,  including  electronic mail,  electronic data interchange,  electronic
commerce and  information  exchange  services.  In the absence of  comprehensive
network  security,  individuals  and  organizations  are able to exploit  system
weaknesses  to gain  unauthorized  access to  networks  and  individual  network
computers. These individuals and organizations use such access to alter or steal
data or, in some  cases,  to launch  destructive  attacks on data and  computers
within a network.  Through the adoption of VPN  technology  products,  users can
create a so-called  Virtual  Private  Network which enables users to exploit the
inherently low cost of public networks in a highly secure manner.

Each of the  following  elements  is  critical  in  creating a complete  network
security  solution  to protect an  organization's  data,  network  and  computer
systems:

o   DATA PRIVACY THROUGH ENCRYPTION.  Preventing unauthorized users from viewing
    private  data  through  the  process  of  "scrambling"  data  before  it  is
    transmitted or placed into electronic storage.

o   USER  IDENTIFICATION  AND  AUTHENTICATION.  Verifying the user's identity to
    prevent unauthorized access to computer and network resources.

o   AUTHORIZATION.  Controlling which systems,  data and applications a user can
    access.

o   DATA INTEGRITY. Ensuring that data, whether in storage or transmission,  has
    not been changed or compromised by any unauthorized manipulation.

o   NON-REPUDIATION.  Verifying  that  data  transmissions  have  been  executed
    between specific  parties so that neither party may legitimately  claim that
    the transaction did not occur.

Over the  years,  a number of network  security  products  have been  developed,
including passwords, token-based access devices, firewalls, encryption products,
biometrics devices, smart cards and digital certificates. Each of these products
was designed with a specific function or objective;  however, none were designed
to meet all of the needs of enterprise-wide network security. Single function or
"point" products that have been developed to address one, or a limited number of
network security requirements, include the following:

o  PASSWORDS AND TOKENS.  Until recently,  passwords were the most common method
   of  authentication.  Static  (non-changing)  passwords  were developed as the
   first  attempt  to address  the need for  authentication.  Static  passwords,
   however,  are inadequate as they are susceptible to unauthorized  viewing and
   to attacks using software  designed to randomly  generate and enter thousands
   of passwords. As a result, dynamic passwords, including single-use passwords,
   were created to provide a greater level of  authentication.  Dynamic password
   implementations  include  the  use  of  time-varying  and  challenge-response
   passwords.  Generally,  dynamic  passwords  require  the use of a  hand-held,
   electronic   device  called  a  hardware   token.   Dynamic   passwords  were
   subsequently strengthened by incorporating two-factor  identification,  which
   provided a higher level of authentication in that two independent  components


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   were  combined  to  identify a user (for  example,  a bank ATM card and a PIN
   code). However, dynamic passwords and two-factor  identification provide only
   a limited level of security because the sessions they  authenticate are still
   vulnerable to interception.

o  FIREWALLS.  Firewalls are network  access  control  devices that regulate the
   passage  of  information  based  on a  set  of  administrator-defined  rules.
   Generally,  firewalls  are  based  upon one of two  technical  architectures:
   packet filters (customarily used in routers) or proxy-based application-level
   gateways.  Packet filters screen network traffic and allow or prevent network
   access  based  upon  source  and  destination  Internet  Protocol  addresses.
   Proxy-based  application-level gateways provide access to applications on the
   network  only  after the user has  identified  the  desired  application  and
   submitted a valid password.

o  ENCRYPTION.   Encryption  products  provide  privacy  for  transmitted  data.
   Encryption  algorithms scramble data so only those users with the appropriate
   decoding  key  are  able to  view  transmitted  or  stored  data.  Public-key
   encryption has recently gained  additional  credibility for managing the keys
   (codes) used to encrypt and subsequently decrypt user designated data.

o  SMART CARDS.  Smart cards are similar in size to credit cards,  but contain a
   small,  tamper-proof  microprocessor chip and are capable of storing data and
   processing   complex   encryption   algorithms.   Smart  cards  are  advanced
   authentication  tokens that are also capable of storing information,  such as
   credit card or bank account numbers, medical records,  photographic images or
   digital certificates.

o  DIGITAL  CERTIFICATES.  A  digital  certificate  serves  as  an  individual's
   electronic identification card. The certificates are digitally certified by a
   third party, called a certificate authority,  who vouches for the identity of
   the certificate  holder.  Digital  certificates  are being  standardized as a
   means  of  authenticating  on-line  users  and  are  perceived  to  be a  key
   technology for the expansion of secure transactions and electronic commerce.

As organizations increase their dependence on the Internet and deploy intranets,
the Company  believes that there will be an increasing  need for a comprehensive
enterprise-wide  network  security  solution.  Many  network  security  vendors,
however,  have focused on developing products that address only one or a limited
number of specific security  requirements.  In addition,  products  developed by
different  vendors are often  difficult  to  integrate  with each other and pose
interoperability problems. Consequently, the Company believes that organizations
will increasingly demand comprehensive  network security solutions that are easy
to implement and transparent to the user.  These solutions must have the ability
to integrate with existing applications, networks and/or mainframe applications,
while being  flexible and powerful  enough to address the needs created by newly
developed technologies.

The current demand for VPN products is being driven by (i) the  increasing  need
for employees to remotely access data, (ii) corporate intranets linking multiple
geographic  locations,  (iii) corporate  extranets linking a company's partners,
suppliers  and  customers  and  (iv)  the  increasing  demand  for  security  in
electronic  commerce.  The increasing reliance by corporate and individual users
on the Internet is causing such users to focus on security  concerns.  From 1996
to 2000,  corporate  network  traffic  increased  over  1000%.  High  percentage
increases are expected to continue as Internet technologies,  such as electronic
commerce,  become more accepted by the general public. In addition, the costs of
operating a network  utilizing  the public lines or Internet  are  substantially
less than T1/T3  interchanges and continue to decline.  With the advent of VPNs,
corporations have a practical, low-cost solution to their networking needs.



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THE V-ONE SOLUTION

The Company  offers a  comprehensive  suite of network  security  products  that
address   the   need   for   identification   and   authentication,   integrity,
non-repudiation,  authorization  and  encryption.  This  combination  of network
security  products enables  organizations  to identify and authenticate  network
users while  controlling  access to specific  network  services.  The  Company's
technology  is  designed  to prevent  unauthorized  access to an  organization's
mission critical  applications and internal data without impeding permitted uses
of the  organization's  resources and  information.  The Company's  products are
compatible with many leading hardware platforms and operating  systems,  as well
as many  third-party  security  products.  The  Company's  customers are able to
integrate  V-ONE's security  products into their networks with minimal impact on
existing systems and applications.

The  Company's  current  suite of products  can be combined  and  configured  to
provide    network    perimeter    security,    secure    remote    access   and
intra/inter-enterprise  security to facilitate secured  electronic  commerce and
information  exchange.   The  Company's  principal  products  are  SmartGate,  a
client/server product that offers identification and authentication,  integrity,
non-repudiation,    authorization    and   encryption;    and   SmartWall,    an
application-level  firewall that  incorporates  SmartGate's  functionality.  The
Company   provides    customers   with   two-factor    identification,    mutual
authentication,  fine-grained  access control and encryption by combining  smart
card emulation  technology  with the SmartGate  server.  In addition,  SmartGate
users can access  enterprise  networks  from remote  locations  using  SmartPass
technology incorporated in SmartGate.

The Company's  technology  provides customers with the ability to create network
security   solutions   designed  to  meet  their   specific   network   security
requirements.  V-ONE's  customers can securely  deploy a broad range of services
and  applications  to engage in  secured  electronic  transactions,  information
exchange  and  remote  access to mission  critical  applications  and  corporate
resources.  The  Company's  technology  is designed to be (i) modular,  allowing
organizations to utilize the security product or products best suited to address
their immediate needs, with a seamless migration path to additional  products as
required, (ii) scaleable,  ranging from a single system supporting several users
to multiple systems  potentially  supporting hundreds of thousands of users, and
(iii) portable,  securing access independent of any particular user's machine or
network entry point through the use of smart card technology.

STRATEGY

The Company's goal is to become the leading provider of comprehensive,  open and
interoperable network security products that are easy to install,  convenient to
use, and highly expandable.  The Company's strategy to realize its goal contains
the following elements:

o   PROVIDE AN INTEROPERABLE, SCALABLE AND OPEN SOLUTION. The Company intends to
    continue  to  provide  network  security  products  that  operate on leading
    platforms  and that are  interoperable  and  compatible  with other  network
    security  products.  The flexible  and open  architecture  of the  Company's
    products enable the Company to deliver component technologies for a seamless
    and  interoperable   system.  In  addition,   the  Company's  technology  is
    expandable,  application-independent  and designed  both to  integrate  with
    existing   technologies  as  well  as  to  support  emerging  standards  and
    applications.

o   AUGMENT AND INTEGRATE WITH EXISTING SECURITY  PRODUCTS.  The Company intends
    to continue  to offer  products  that  interoperate  with a wide  variety of
    third-party  security  products,  including  multiple  firewalls and tokens,
    allowing a customer  to  augment  existing  network  security  systems.  The
    Company believes that its technology  protects a customer's existing network
    security   investments  because  the  Company's  products  are  designed  to
    integrate  easily with point products  currently  employed by its customers.
    The Company  believes  that this  strategy  will enable it to gain access to


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    potential  customers who have previously made network  security  investments
    but whose network security needs are continuing to evolve.

o   LEVERAGE KEY REFERENCE  ACCOUNTS IN SELECTED VERTICAL  MARKETS.  The Company
    has identified strategic vertical markets that require sophisticated network
    security  solutions  and has targeted its marketing and direct sales efforts
    on key participants  within these selected vertical markets. By successfully
    installing  its products at key  accounts,  the Company  intends to leverage
    positive  references  from its installed  customer base to expand its market
    penetration  within  those  information  critical  industries.  The  Company
    intends to  increase  its  marketing  and sales  efforts  through the use of
    value-added resellers ("VAR's"), original equipment manufacturers ("OEM's"),
    and Application  Service Providers  ("ASP's") to expand its customer base in
    additional  vertical  markets.  Specific vertical markets focused on include
    Banking and Finance,  Healthcare, and Government.  These efforts have proven
    successful,  resulting in significant new business. V-ONE recently announced
    a $500,000 sale of VPN software products to the FBI's Law Enforcement Online
    (LEO)  Program.  In addition,  V-ONE  recently  supplied its  SmartGate  and
    SmartGuard  solution to the Court Services and Offender  Supervision  Agency
    for the  District  of  Columbia  (CSOSA),  so that  CSOSA  and  U.S.  Parole
    Commission  officials,  as well as District of Columbia  police,  can access
    CSOSA's  sex  offender  database  in real  time.  In spring  2000,  Regional
    Information  Sharing  Systems  (RISS),  which  operates  a  secure  intranet
    communications  system  for  regional  and local law  enforcement  agencies,
    standardized on V-ONE's SmartGate(TM) VPN to be the security  foundation for
    their  network.  RISS has over 7,000  SmartGate  clients  licensed to enable
    authenticated,  encrypted,  and managed access to sensitive law  enforcement
    information in real time.

o   DEVELOP AND LEVERAGE STRATEGIC ALLIANCES AND PARTNERING  RELATIONSHIPS.  The
    Company has established  strategic  marketing and distribution  alliances to
    increase the  distribution  and market  acceptance  of its network  security
    products  including  alliances with a variety of major companies,  including
    Motorola,  Sun  Microsystems,  Microsoft and Sharp.  The Company  intends to
    continue to strengthen its existing  strategic  alliances  while forging new
    relationships with key industry participants.

In addition, the Company is exploring  opportunities to develop new products and
expand the  functionality of its existing  products  through  alliances with key
vendors of complementary technologies.

PRODUCTS

V-ONE's  family of products  addresses the entire range of customer needs across
the VPN  continuum.  The Company  believes its product  offerings to be the most
comprehensive VPN product family of any vendor in the industry.  With the recent
release  of  SmartGuard,  the  Company  has  entered  the  market  for  firewall
appliances targeted at small and medium sized enterprises.

The  Company's  security  products  cover  the  three  key  segments  of the VPN
marketplace:

o  REMOTE ACCESS.  Driven by replacing costly dial-up access,  800 numbers,  and
   Remote Access Servers ("RAS"). Instead, remote salespeople, service staff, or
   home  workers  connect to company  IT  resources  through  any  standard  ISP
   connection secured by VPN technology.

o  EXTRANET. Enabling companies to share information and business processes over
   the Internet with their customers and suppliers. Extranets decrease costs and
   reduce cycle times throughout the supply chain.

o  SITE-TO-SITE.  Allowing  companies  to  interconnect  remote  offices via the
   Internet and replace costly private data networks.



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The  cornerstone  of the  Company's  network  security  solution is its patented
SmartGate  client/server  security  technology.   SmartGate  enables  two-factor
authentication,  mutual  authentication and fine-grained access control for most
TCP/IP-based   client/server    applications.    Using   SmartGate   technology,
organizations can employ two-factor  authentication and mutual authentication to
identify and  authenticate  a network  user while  fine-grained  access  control
restricts  each  user's  access  to only  those  services  to which  the user is
entitled.

The key benefits of V-ONE's SmartGate VPN solution are:

o   SECURE   COMMUNICATIONS:   Strong  3DES  encryption   ensures  that  private
    information is not intercepted or altered during transmission.

o   STRONG  AUTHENTICATION:  Absolutely  ensuring the authorized identity of the
    user   through   multiple   authentication   methods,    including   digital
    certificates,  smart cards,  RSA SecurID,  and Radius,  among others.  These
    authentication  methods  provide a much higher degree of trust than the less
    secure usernames and passwords.

o   ACCESS CONTROL:  V-ONE SmartGate ensures highly  configurable  management of
    access  control  privileges,  ensuring  that users have  access to  approved
    applications,  and are completely  insulated from  restricted  applications.
    System  administrators  have  fine-grained  control  of access to  specified
    services on specific servers.

o   SECURITY  LOGGING:   A  comprehensive   corporate  security  policy  can  be
    administered  with the help of extensive  logging  capabilities  that ensure
    "hacking" attempts are monitored.

These  capabilities  are supported across the three market segments by a unified
security  administration  application.  An Infonetics VPN market study concludes
that 80% of VPN deployments will cover two or more of these market segments.  An
end-user  faces the  choice of  deploying  multiple  solutions  from two or more
vendors with duplicate  administrative work, or deploying one V-ONE solution for
all three segments with unified administration.

The   Company's   network   security   products   are  designed  to  protect  an
organization's  information and networks from unauthorized access while allowing
users  of the  network  to  conduct  business  securely  over the  Internet  and
intranets.  These  products have been designed to  interoperate  seamlessly  and
enhance application functionality. The Company designs its products so that they
can be combined in different  configurations to provide customized solutions for
its customers.

A discussion of the Company's products follows.

SMARTGATE(TM)  is  designed  to  interoperate   easily  with  most  TCP/IP-based
applications  and to allow  the end user to use  securely  existing  and  future
software  applications  over  the  Internet  and  Intranets.  SmartGate  employs
two-factor   authentication   (two   independent   components  are  combined  to
authenticate  a user) and  mutual  authentication  (both the  server  and client
determine  that the other party to the  transaction is authorized to participate
in the transaction)  through the use of virtual or physical smart cards or other
authentication devices.  SmartGate establishes a secured, encrypted link over an
unsecured network once both parties to a communication  have been identified and
authenticated. The authorized user is then granted access only to those services
and data for which the user has been approved.  SmartGate supports secure remote
administration, which can be accessed using a Web browser or telnet.

SMARTGATE(TM) WITH IPSec extends the client deployment and management advantages
of V-ONE's patented online registration process to intranet  environments.  This
enables  V-ONE to compete for remote  access VPN business  (which  offers secure


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connectivity for remote employees and satellite offices) with a solution that is
standards-based yet offers unique ease of deployment features.

SMARTGUARD(TM)  is a  security  appliance  that  provides  a  fully  functional,
completely  integrated VPN solution consisting of a powerful user authentication
system,   a  user   access   control   database,   state-of-the-art   encryption
capabilities,   user-friendly  client  software  and  a  full-featured  optional
firewall.

SMARTWALL(TM),  a firewall product,  provides a high level of protection against
unauthorized  access to a secured network from an unsecured  network.  SmartWall
also  allows  transparent  access  from the  secured  network  to  services  and
applications on the unsecured  network.  SmartWall  includes a secured graphical
user  interface for firewall  administration,  strong mutual  authentication  to
identify users and complete  transparency for authorized  traffic.  In addition,
SmartWall allows multiple sites to be administered from any location using a Web
browser or Telnet.  SmartWall  supports  multiple  types of existing  encryption
products,   authentication   tokens,  proxy  services  and  secure  transmission
channels. SmartGate is bundled into every SmartWall.

AIR  SMARTGATE,  working in a manner  similar to  SmartGate,  allows for secure,
encrypted, authenticated communication between two-way pagers and e-mail through
a  SmartGate   server.   Air  SmartGate   delivers   communication   privacy  to
pager-to-pager,  email-to-pager and pager-to-email traffic and text messaging by
providing two-factor authentication and strong data encryption capabilities. Air
SmartGate is a `drop-in'  security solution that  interoperates  seamlessly with
advanced  two-way  messaging  networks using  Motorola's  ReFlex  communications
technology  and is scheduled for  deployment  by a number of leading  providers.
Skytel  has  recently  begun to  offer  this  service  initially  to  government
customers.

With the  release of  SmartGate  4.0 in early  2000,  V-ONE now  supports  IPSec
protocol,  which is especially  effective for the Remote Access and Site-to-Site
markets. It also has an extranet mode that offers key advantages to the extranet
market,  in  particular  the ability to  effectively  navigate  across  external
corporate firewalls from varying vendors.

With the introduction of the SmartGuard appliance in May 2000, V-ONE entered the
market for VPN appliances  targeted at small and medium sized  enterprises.  The
SmartGuard  appliance  provides  a  fully  integrated  VPN  solution  and can be
configured with a fully integrated third party firewall,  at a price targeted at
the small to medium sized enterprise.

SmartGate for Windows 2000 and ME is scheduled for release in June 2001.

CUSTOMER SERVICE AND SUPPORT

The Company provides one hour of installation and configuration support for each
VPN purchase.  The Company also offers, for a fee, on-site  installation support
and basic administrator training with each software product and bundled hardware
product sale. Customers are encouraged to purchase software  maintenance,  which
includes product  updates/upgrades  and telephone  support.  A one-year hardware
warranty comes with each bundled hardware purchase.

The Company offers additional user or administrator  training,  on-site support,
systems  integration  and system  security  architecture  support as an optional
service  through its Customer  Care staff.  Additionally,  the Company  provides
support  services  for  those  customers  who have  entered  into an  evaluation
agreement with the Company.



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PRODUCT DEVELOPMENT

The market for the  Company's  products  is dynamic and  rapidly  changing.  The
Company  believes  that its future  success will depend upon its ability to: (i)
enhance its  existing  products,  (ii)  identify new  opportunities  to leverage
existing  technologies,  and (iii)  develop new  technologies  resulting  in new
products, markets and services.  Accordingly, the Company expects to continue to
make a  significant  investment  in research  and  development,  product  market
analysis and systems integration.  The Company believes that its customer-driven
development  strategy  will  enable  it  to  continue  to  broaden  its  product
offerings.

MARKETING AND BUSINESS DEVELOPMENT

The Company believes that the future success of the V-ONE product offerings will
depend on the Company's ability to execute a much more sharply focused sales and
marketing  strategy.  To date,  the Company  has had  success in the  government
sector  and  plans to  implement  a sales and  marketing  strategy  designed  to
replicate  that success with large  non-governmental  enterprises.  As such, the
Company's direct sales efforts will continue to be focused on the Federal, state
and local governments and certain targeted large enterprise opportunities in the
commercial sector.  Other sectors will be marketed through the Company's channel
partners.

In order to assist the  Company in  focusing  its sales  efforts on these  large
enterprises,  in particular a selected  group of large network  integrators  and
Internet service providers, the Company retained MindSquared, LLC. Clint Heiden,
a Senior Consultant at MindSquared,  LLC, is primarily responsible for assisting
the Company in its  marketing  efforts.  Mr.  Heiden spent most of his career at
UUNET, which he joined in 1994 as director of sales. From 1996 to 2000 he served
as UUNET's vice president for U.S. sales,  during a period of significant growth
for UUNET.  Most  recently  Mr.  Heiden  served as  President  of Online  Office
Supplies Company, a privately held concern providing e-commerce office solutions
to businesses  worldwide.  Mr. Heiden is the son of Heidi Heiden,  a Director of
V-ONE and a partner in MindSquared,  LLC. James McManus, a director of V-ONE, is
also a partner in MindSquared, LLC.

The Company's consulting  agreement with MindSquared,  LLC commenced on November
27, 2000,  terminates on March 31, 2001, and may be extended by agreement of the
parties.  It provides  for a maximum  payment of  $200,000  over the term of the
agreement.  The agreement also provides for the issuance of 100,000  warrants to
MindSquared,  LLC to purchase the  Company's  Common Stock upon the execution of
the  agreement  and for the  issuance of  additional  warrants  to purchase  the
Company's  Common Stock upon the  achievement of various  marketing  goals.  The
exercise  price for all such  warrants is the fair market value of the Company's
Common Stock on the date the warrants are issued.

COMPETITION

V-ONE competes in the market for network  security  products and services.  This
market is very  competitive and the Company expects  competition to intensify in
the future. Currently, V-ONE offers products that compete in several segments of
the network security market,  including  hardware assisted  encryption  devices,
token  authentication,  smart  card-based  security  applications and electronic
commerce  applications.  The  Company's  SmartGate  products  compete in the VPN
segment of the network security market, and also can be used in conjunction with
many other security solutions in the broader network security market,  including
intrusion  detection  products,  virus scanning products,  token  authentication
products,  biometric authentication  products,  digital certificate products and
firewalls.

The Company's  competitors for Internet and intranet security and access control
include  Aventail   Corporation,   AXENT  Technologies,   Check  Point  Software
Technology,   Cisco  Systems,   Intel/Shiva,   International  Business  Machines


                                       10
<PAGE>

Corporation,  Microsoft, Network Associates,  Northern Telecom (NortelNetworks),
Radguard,  RedCreek, Secure Computing Corporation,  Sun Microsystems,  TimeStep,
and VPNet. With the introduction of the Company's appliance SmartGuard(TM),  the
Company now competes with security  appliance  providers  such as Watchguard and
SonicWall.  The Company  competes to a lesser degree with token vendors  because
the  Company's  SmartGate  product  supports many vendor  tokens.  Token vendors
include  AXENT  Technologies,  Leemah  DataCom  Security  Corporation,  National
Semiconductor,  Racal-Guardata  and Security  Dynamics  Technologies.  For smart
card-based security  applications,  the Company principally  competes with those
token vendors listed above who offer smart card technology.

In the VPN market place, which is the Company's primary market,  there are three
classes of products:

1. Products  that  provide  secure  remote  access to a company's  intranet  and
   internal LAN-based  information by a company's own employees,  telecommuters,
   or mobile  workers.  In this market,  V-ONE  competes with  companies such as
   Check Point and Aventail.

2. Products  that  provide  secure  communication  among  business  partners and
   customers  that are not on the same  intranet or LAN-based  system,  commonly
   referred to as extranet products. In the extranet market, V-ONE competes with
   companies such as Aventail and TimeStep.

3. Products  that  provide  secure   communication  for   office-to-office   and
   LAN-to-LAN  applications.  These are referred to as intranet or  site-to-site
   VPN products.  In the site-to-site market, V-ONE competes with companies such
   as VPNet, TimeStep and Radguard.

The Company faces intense competition in all of its market segments.

BACKLOG AND CUSTOMERS

The Company's  customers order on an as-needed  basis. The Company has typically
been able to ship  products  within 30 days  after the  customer  submits a firm
purchase order. The Company does not generally maintain long-term contracts with
its customers that require customers to purchase its products.  Accordingly, the
Company has not maintained  and does not  anticipate  maintaining a backlog with
the exception of long-term service contracts.

SUPPLY SOURCES

Components used in the Company's  network security products consist primarily of
computer   diskettes  and  computer  magnetic  tapes  and  CD's  purchased  from
commercial  vendors.  Components  used in the  Company's  turnkey  SmartWall and
SmartGate server products consist primarily of off-the-shelf computers,  memory,
displays,  power supplies and third-party  peripherals  (such as hard drives and
network interface cards).

The Company has  agreements  with at least two vendors for each of its parts and
components.  However, the Company orders most of its parts and components from a
single vendor to maintain quality control and enhance working relationships. The
Company uses smart card readers manufactured by two contract manufacturers based
on the Company's design  specifications.  The Company has outsourced to hardware
fulfillment companies its hardware and hardware integration requirements.

While the Company believes that alternative sources of supply could be obtained,
the Company's inability to develop alternative sources if and as required in the
future could result in delays or reductions in product shipments that could have
a material  adverse effect on the Company's  business,  financial  condition and
results of operations.



                                       11
<PAGE>

REGULATION AND GOVERNMENT CONTRACTS

The  Company's   information   security  products  are  subject  to  the  export
restrictions  administered by the U.S. Department of Commerce,  which permit the
export of encryption  products only with the required level of export license or
through a license  exception KMI (Key  Management  Infrastructure).  U.S. export
laws  prohibit  the  export  of  encryption  products  to a  number  of  hostile
countries.  Although to date the  Company  has been able to secure all  required
U.S.  export  licenses,  including the license  exception  KMI,  there can be no
assurance that the Company will continue to be able to secure such licenses in a
timely manner in the future, or at all.

In certain foreign countries,  the Company's distributors are required to secure
licenses or formal  permission before  encryption  products can be imported.  To
date, except for certain limited cases, the Company's distributors have not been
denied permission to import the Company's products.

LICENSE AGREEMENTS

The  Company's  SmartGate  and  Wallet  Technology  software   incorporate  data
encryption and  authentication  technology owned by RSA Security,  Inc. ("RSA").
The Company has a perpetual  license  agreement with RSA, which became effective
as of December 30, 1994. On May 23, 1996,  RSA exercised an option granted under
the agreement to convert its right to receive  future  royalties  into 2% of the
Company's outstanding voting securities,  after giving effect to the issuance to
RSA, until the date of the Company's initial public offering  ("IPO").  Pursuant
to a separate  agreement between RSA and  Massachusetts  Institute of Technology
("MIT"),  MIT is  entitled  to  receive  a  portion  of any  royalties  that RSA
receives.  As a result,  the  Company  issued  directly  to MIT a portion of the
shares of Common Stock to which RSA was entitled  under the RSA  Agreement.  The
Company issued 188,705 shares of Common Stock to RSA and MIT  immediately  prior
to  consummation  of the IPO. RSA was acquired by Security  Dynamics in 1996. On
July 14, 1999 Security Dynamics changed its name to RSA Security, Inc.

There can be no assurance  that the Company will be able to maintain its license
rights for the RSA data encryption and authentication  technology,  and the loss
of such rights could have a material  adverse effect on the Company's  business,
financial  condition and results of  operations.  If either RSA  terminates  the
license  agreement  or takes any other  action  that  results in the loss of, or
inability  to maintain,  such  licensed  technology,  the Company may incur lost
sales,  delays in delivery of the  Company's  current  products  and services or
delays in the  introduction  of new  products and  services,  which could have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of operations.

PATENTS, PROPRIETARY TECHNOLOGY, TRADEMARKS AND LICENSES

The Company has received seven patents,  which expire over a period between 2014
and 2017, and has two pending patent  applications with the United States Patent
and  Trademark  Office.  The patents  cover  certain  aspects of its  technology
including   ease  of  use   advantages   gained  by  quick  client   deployment,
expandability  and  management  features.  The Company's  stylized  "V-ONE," the
phrase  "Security  for  a  Connected  World,"  and  the  Company's  "SmartGate,"
"SmartWall,"  and  "SmartGuard"  products  and certain  other  products  are the
subject of U.S. and foreign  tradename and  trademark  filings.  Prosecution  of
these patent applications and any other patent applications that the Company may
subsequently  determine  to file may  require  the  expenditure  of  substantial
resources.  The  issuance of a patent from a patent  application  may require 24
months or longer.  There can be no assurance that the Company's  technology will
not become  obsolete while the Company's  applications  for patents are pending.
There also can be no  assurance  that any pending or future  patent  application
will be granted, that any future patents will not be challenged,  invalidated or
circumvented  or that the rights  granted  thereunder  will provide  competitive
advantages to the Company.  The Company has pursued patent protection outside of
the United States for the  technology  covered by the most recently filed patent


                                       12
<PAGE>

applications although there can be no assurance that any such protection will be
granted or, if granted,  that it will adequately  protect the technology covered
thereby.

The Company's  success is also dependent in part upon its  proprietary  software
technology.  There can be no  assurance  that the  Company's  trade  secrets  or
non-disclosure agreements will provide meaningful protection for its proprietary
technology and other proprietary information. In addition, the Company relies on
"shrink wrap" license  agreements that are not signed by the end user to license
the Company's products and,  therefore,  may be unenforceable  under the laws of
certain  jurisdictions.  Further, there can be no assurance that others will not
independently develop similar technologies or duplicate any technology developed
by the Company or that its technology will not infringe upon patents, copyrights
or other intellectual property rights owned by others.

Further,  the  Company  may be  subject  to  additional  risk as it enters  into
transactions  in  countries  where  intellectual  property  laws  are  not  well
developed or are poorly enforced.  Legal protections of the Company's rights may
be ineffective in foreign  markets,  and technology  manufactured or sold abroad
may not be protectable in  jurisdictions  in  circumstances  where protection is
ordinarily available in the United States.

The Company believes that, due to the rapid pace of technological innovation for
network  security   products,   the  Company's  ability  to  establish  and,  if
established,  maintain a position of  technology  leadership  in the industry is
dependent  more upon the  skills of its  development  personnel  than upon legal
protections afforded its existing or future technology.

As  the  number  of  security  products  in  the  industry   increases  and  the
functionality of these products further overlaps, software developers may become
subject to  infringement  claims.  There can be no assurance  that third parties
will not assert  infringement  claims  against  the  Company in the future  with
respect  to  current  or future  products.  The  Company  also may  desire or be
required to obtain  licenses  from others to  effectively  develop,  produce and
market commercially viable products. Failure to obtain those licenses could have
a material  adverse  effect on the  Company's  ability  to market  its  software
security  products.  There  can be no  assurance  that  such  licenses  will  be
obtainable  on  commercially  reasonable  terms,  if at all,  that  the  patents
underlying  such licenses will be valid and  enforceable or that the proprietary
nature  of the  unpatented  technology  underlying  such  licenses  will  remain
proprietary.

There  has been,  and the  Company  believes  that  there may be in the  future,
significant  litigation in the industry  regarding patent and other intellectual
property  rights.  Although  the  Company is not  currently  the  subject of any
material intellectual  property litigation,  litigation involving other software
developers,   including  companies  from  which  the  Company  licenses  certain
technology,  could have a material  adverse  affect on the  Company's  business,
financial condition and results of operations.

EMPLOYEES

As of March 1, 2001, the Company had 59 full-time  employees and 12 consultants.
Of these  individuals,  25 were in sales and marketing,  22 were in research and
product development,  and 14 in administration.  None of the Company's employees
are  represented  by a labor  union or are  subject to a  collective  bargaining
agreement.  The Company has never  experienced a work stoppage and believes that
its employee relations are good.

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS AND MARKET PRICE OF COMMON STOCK

V-ONE operates in a rapidly changing  environment that involves  numerous risks,
some of which are beyond V-ONE's control.  The following  discussion  highlights
some of the  risks  V-ONE  faces.  This  Annual  Report  on Form  10-K  contains


                                       13
<PAGE>

"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 other documents
to be filed by V-ONE with the SEC, which may identify important risk factors for
V-ONE.

V-ONE'S  ACCUMULATED  DEFICIT. As of December 31, 2000, V-ONE had an accumulated
deficit  of  approximately  $48.9  million.  V-ONE  currently  expects  to incur
additional net losses over the next several  quarters.  Moreover,  V-ONE may not
achieve or sustain  profitability  or  significant  revenues in the  foreseeable
future,  if ever.  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  have a  material  adverse
effect on V-ONE's business,  financial condition, results of operations and cash
flows.

RISKS RELATING TO  AVAILABILITY  OF CAPITAL.  It is anticipated  that V-ONE will
continue to expend  significant  amounts to fund its operations and research and
development. V-ONE's cash and cash equivalents may not be sufficient to meet its
requirements  until it  reaches  profitability.  In order  to  maintain  V-ONE's
operations and research and development at necessary  levels,  V-ONE may need to
secure  additional  financing  through  the sale of equity or other  securities.
V-ONE may be unable  to place  equity  securities  on  favorable  terms or in an
amount  required  to meet  its  future  cash  requirements.  If such  additional
financing  is  not  available,   V-ONE  may  be  required  to  reduce  its  cash
requirements through significant reductions in operating levels. If V-ONE is not
successful  in  reducing  operating  levels  and even if  operating  levels  are
reduced, V-ONE may not be able to maintain operations for any extended period of
time.

RISKS ASSOCIATED WITH EMERGING  NETWORK SECURITY MARKET.  The market for V-ONE's
products,   particularly  its  client/server   VPN  products,   remains  in  the
development  stage and market  acceptance of these products has been slower than
expected.  Because  the market for  network  security  products  is still in the
development stage and many potential  customers are only now being introduced to
VPN  technology,  it is difficult to assess the extent of market  acceptance  of
V-ONE's  products,  the product features  desired by the market,  the best price
structure  for  V-ONE's  products,   the  best  distribution  strategy  and  the
competitive environment that will develop in this market. The demand for V-ONE's
products could decline as a result of  competition,  technological  change,  the
public's  perception  of the need for  security  products,  developments  in the
hardware and software  environments  in which these  products  operate,  general
economic conditions or other factors beyond V-ONE's control.

V-ONE'S  DEPENDENCE  ON  THIRD  PARTY  MARKETING  ARRANGEMENT.  V-ONE's  current
marketing  strategy of focusing direct sales efforts  exclusively on the federal
government  and  large  enterprises  is  heavily  dependent  on  its  consulting
agreement with MindSquared,  LLC. This agreement  currently expires on March 31,
2001,  and  although  there are no  expectations  to the  contrary,  there is no
assurance that the parties will extend the agreement.

RISKS OF  COMPETITION.  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 affect on V-ONE's business.  There is no assurance


                                       14
<PAGE>

that  V-ONE  will be able to  compete  effectively  against  current  or  future
competitors.

RISK  OF  INADEQUATE  PROTECTION  FOR  V-ONE'S  TECHNOLOGIES.  V-ONE  relies  on
trademarks,  copyrights,  patents and trade  secrets,  employee and  third-party
non-disclosure  agreements  and other methods to protect the rights of V-ONE and
the  companies  from which V-ONE  licenses  technology.  Enforcement  of V-ONE's
rights may be expensive,  time-consuming and ultimately unsuccessful and may not
provide adequate protection for V-ONE's technology or the technology it licenses
from others. Moreover,  others may independently develop similar technologies or
duplicate any technology  developed by V-ONE. As the number of security products
in the industry  increases  and the  functionality  of these  products  overlap,
software  developers,  such as V-ONE, may become subject to infringement claims.
V-ONE also may desire or be required to obtain  licenses from others in order to
achieve desirable functionality. Failure to obtain such licenses could adversely
affect V-ONE's ability to market its software security products.

RISK OF ERRORS,  FAILURES AND PRODUCT  LIABILITY.  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 against it. 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 the market's  perception of
security products in general or V-ONE's products in particular.

RISKS OF CHANGES IN TECHNOLOGY AND INDUSTRY.  The network  security  industry is
characterized by rapid changes, including evolving industry standards,  frequent
new product  introductions,  continuing  advances in  technology  and changes in
customer requirements and preferences. Advances in techniques by individuals and
entities  seeking to gain  unauthorized  access to networks could expose V-ONE's
existing  products  to  new  and  unexpected  attacks  and  require  accelerated
development of new products or enhancements to existing  products.  V-ONE may be
unable to counter  challenges to its current products.  V-ONE's  competitors may
develop  superior  products and V-ONE's  future  products may not keep pace with
technological  changes  implemented by competitors or persons  seeking to breach
network security. Its products may not satisfy evolving consumer preferences and
V-ONE may not be successful in developing and marketing  products for any future
technology.  Failure to develop and introduce  new products and improve  current
products in a timely fashion could adversely affect V-ONE.

RISK OF DEVELOPMENT DELAYS.  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. 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 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.



                                       15
<PAGE>

RISKS  ASSOCIATED WITH LONG SALES CYCLE. The sales cycle associated with V-ONE's
products is likely to be lengthy due to a number of significant risks over which
V-ONE has little or no control. 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.

RISK OF SALES TO GOVERNMENT AGENCIES.  No government agency or department has an
obligation to purchase  products from V-ONE in the future.  Government  contacts
may often be terminated by the government 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.
Any of the foregoing  events could adversely  affect V-ONE.  V-ONE estimates for
the  fiscal  year  ended  December  31,  2000,  sales  to  the  U.S.  government
constituted approximately 45% of its revenue.

RISK OF EFFECT OF GOVERNMENT  REGULATION ON TECHNOLOGY EXPORTS.  V-ONE currently
sells its  products  abroad and intends to continue to expand its  relationships
with  international  distributors.  V-ONE's  international  sales and operations
could be subject  to risks  such as the  imposition  of  governmental  controls,
export license requirements,  restrictions on the export of critical technology,
trade restrictions and changes in tariffs.  In particular,  V-ONE's  information
security  products are subject to the export  restrictions  administered  by the
U.S. Department of Commerce.  These restrictions,  in the case of some products,
permit the export of encryption  products only with a specific  export  license.
These export laws also prohibit the export of encryption products to a number of
countries, individuals and entities and may restrict exports of some products to
a narrow range of end-users. In certain foreign countries,  V-ONE's distributors
are required to secure licenses or formal permission before encryption  products
can be  imported.  V-ONE has  obtained  a  license  exception  to export  strong
encryption from the U. S. Department of Commerce on a worldwide basis (except to
the  seven  terrorist  countries)  as  long as the end  user  agrees  to use the
KRAKit(TM) session key recreation capability. Foreign competitors that face less
stringent  controls on their  products may be able to compete  more  effectively
than V-ONE in the global network security market.

EFFECTS OF CERTAIN  PROVISIONS OF THE CERTIFICATE OF  INCORPORATION,  BYLAWS AND
DELAWARE LAW. Certain provisions of V-ONE's Amended Certificate of Incorporation
and of Delaware  law could delay or make  difficult  a merger,  tender  offer or
proxy contest involving V-ONE.  Among other things,  these provisions  include a
classified board, prohibitions on removing directors except for cause, and other
requirements.

MARKET VOLATILITY.  The market price of the Company's Common Stock is subject to
significant  fluctuations  in  response to  variations  in  quarterly  operating
results and other factors,  such as announcements of new products by the Company
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 the Company's Common Stock.

ITEM 2.  PROPERTIES

The  Company  leases  approximately  28,312  square  feet  of  office  space  in
Germantown,  Maryland under a lease  agreement that will expire on July 1, 2003.
The Company  expects that this space will be  sufficient  for its needs  through
March 31, 2002. The Company also leases  approximately  8,085 square feet, which
is sublet in  Rockville,  Maryland  under  leases  that will expire on April 17,
2001.



                                       16
<PAGE>

ITEM 3.  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, 20000, plaintiff Raj Patel filed a nearly identical
Class Action  Complaint  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 complaint in the
matter.  The Court  entered an  identical  Order in the Patel matter on March 3,
2000.

On February 20, 2001, the suit was dismissed in its entirety, with prejudice. In
granting the Company's  motion to dismiss,  United States  District  Court Judge
Marvin J. Garbis ruled that plaintiffs had failed to state a cause of action for
violations of the securities laws and awarded costs to the defendants.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company's security holders during the
quarter ended December 31, 2000.























                                       17
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The  Company's  Common Stock was traded in the Nasdaq  National  Market from the
Company's  IPO on  October  24,  1996  through  September  3,  1999  when it was
transferred to the Nasdaq SmallCap Market. According to records of the Company's
transfer  agent,  the Company had  approximately  166 record holders on March 1,
2001.  Because brokers and other institutions hold many of such shares on behalf
of  stockholders,  the  Company  is  unable  to  estimate  the  total  number of
stockholders represented by these record holders. The following table sets forth
the low and high sale  prices of the  Company's  Common  Stock for each  quarter
during the two year period ended December 31, 2000.


                                      2000
                                      ----

                   High Sale Price              Low Sale Price
                   ---------------              --------------

      First Quarter     $9.500                    $4.875
      Second Quarter    $5.844                    $2.063
      Third Quarter     $5.184                    $2.188
      Fourth Quarter    $2.684                    $0.531

                                      1999
                                      ----

                   High Sale Price              Low Sale Price
                   ---------------              --------------

      First Quarter     $4.688                    $2.750
      Second Quarter    $3.313                    $1.688
      Third Quarter     $5.625                    $2.000
      Fourth Quarter   $15.500                    $1.875

The Company has never declared or paid cash  dividends on its Common Stock.  The
Company  anticipates that all of its net earnings,  if any, will be retained for
use in its  operations  and does not  anticipate  paying cash  dividends  on its
Common Stock in the foreseeable  future.  Payments of future cash dividends,  if
any, will be at the discretion of the Company's  Board of Directors after taking
into account  various  factors,  including  the Company's  financial  condition,
operating results and current and anticipated cash needs.

ITEM 6.  SELECTED FINANCIAL DATA

The  selected  financial  data set forth  below with  respect  to the  Company's
Statements of Operations  for the years ended  December 31, 1998,  1999 and 2000
and balance sheets as of December 31, 1999 and 2000 are derived from the audited
financial  statements of the Company  included  elsewhere in this Annual Report.
The following financial data as of December 31, 1996, 1997 and 1998 and for each
of the years ended December 31, 1996 and 1997 are derived from audited financial
statements of the Company not included in this Annual Report. The financial data
set forth  below  should be read in  conjunction  with the  Company's  financial
statements  and the notes thereto  included  elsewhere in this Annual Report and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."






                                       18
<PAGE>

<TABLE>
<CAPTION>
                                                          Year ended December 31,
                                 ---------------------------------------------------------------------------
Statement of Operations Data:            1996           1997            1998           1999            2000
                                         ----           -----           -----          -----           -----
<S>                                 <C>             <C>             <C>             <C>             <C>

Revenues:
   Products                         $  5,008,523    $  5,470,230    $  5,798,542    $  3,427,422    $  3,356,086
   Consulting and services               310,557         502,771         461,263       1,538,258       1,197,544
                                    ------------    ------------    ------------    ------------    ------------
      Total revenues                   5,319,080       5,973,001       6,259,805       4,965,680       4,553,630
                                    ------------    ------------    ------------    ------------    ------------

Cost of revenues:
   Products                            1,969,117       1,848,871       1,623,396         973,866         441,752
   Consulting and services                56,502          96,949          68,060         137,281         122,107
                                    ------------    ------------    ------------    ------------    ------------
      Total cost of revenues           2,025,619       1,945,820       1,691,456       1,111,147         563,859
                                    ------------    ------------    ------------    ------------    ------------
Gross profit                           3,293,461       4,027,181       4,568,349       3,854,533       3,989,771
                                    ------------    ------------    ------------    ------------    ------------

Operating expenses:
   Sales and marketing                 3,914,630       7,717,640       7,306,279       6,683,039       6,198,146
   General and administrative          4,879,940       3,699,278       3,896,210       3,118,829       3,517,068
   Research and development            1,960,727       3,153,941       2,618,914       2,848,955       3,440,397
---------------------------------   ------------    ------------    ------------    ------------    ------------
      Total operating expenses        10,755,297      14,570,859      13,821,403      12,650,823      13,155,611
                                    ------------    ------------    ------------    ------------    ------------
Operating loss                        (7,461,836)    (10,543,678)     (9,253,054)     (8,796,290)     (9,165,840)
                                    ------------    ------------    ------------    ------------    ------------


Interest (expense) income:
   Interest expense                     (518,965)        (13,130)        (65,372)       (676,443)        (25,945)
   Interest income                       168,176         341,469         125,030         164,841         329,770
                                    ------------    ------------    ------------    ------------    ------------
Loss before extraordinary item      $ (7,812,625)   $(10,215,339)   $ (9,193,396)   $ (9,307,892)   $ (8,862,015)
                                    ============    ============    ============    ============    ============
      Total interest (expense)
      income                            (350,789)        328,339          59,658        (511,602)        303,825
                                    ------------    ------------    ------------    ------------    ------------

Extraordinary item -
  early extinguishment of
  debt                                      --              --              --          (372,052)           --
                                    ------------    ------------    ------------    ------------    ------------
Net loss                              (7,812,625)    (10,215,339)     (9,193,396)     (9,679,944)     (8,862,015)

Dividend on preferred stock                 --            12,600         110,879         272,245         369,979
Deemed dividend on preferred
stock                                       --           600,000         102,755            --              --
                                    ------------    ------------    ------------    ------------    ------------

Loss attributable to holders
of common stock                      $(7,812,625)    $(10,827,939)   $(9,407,030)   $(9,952,189)     $(9,231,994)
                                     ============    ============    ============    ============    ============

Basic and diluted loss per share:

Loss before extraordinary item      $      (0.85)   $      (0.84)   $      (0.68)   $      (0.57)   $      (0.44)
                                    ============    ============    ============    ============    ============
Net loss attributable to
holders of common stock             $      (0.85)   $      (0.84)   $      (0.68)   $      (0.59)   $      (0.44)
                                    ============    ============    ============    ============    ============

Weighted average number of
common shares outstanding              9,245,305      12,868,859      13,898,450      16,938,205      20,871,076
                                    ============    ============    ============    ============    ============

                                                        19
<PAGE>


                                                                 December 31,
                                     ---------------------------------------------------------------------
                                         1996           1997            1998           1999            2000
                                         ----           -----           -----          -----           -----
Balance Sheet Data:

Working capital (deficit)           $ 11,526,091    $  5,912,046     $(1,277,368)   $  6,629,846    $  1,591,967
Total assets                          14,580,346      10,313,276       3,922,192       9,775,436       5,450,618
Long-term debt, less current             134,704         300,861         197,982         119,746          47,803
portion
Series A Convertible Preferred              --         3,766,297            --              --              --
Stock
Series B Convertible Preferred              --              --              --             1,288           1,288
Stock
Series C Redeemable Preferred               --              --              --               335              55
Stock
Total shareholder's equity            12,876,676       4,211,210         635,725       7,841,603       2,721,581
</TABLE>





                                                        20
<PAGE>


ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION

FORWARD-LOOKING INFORMATION

All forward-looking  information  contained in this Management's  Discussion and
Analysis  of  Financial  Conditions  and  Results  of  Operations  is  based  on
management's current knowledge of factors affecting the Company's business.  The
Company's  actual  results  may differ  materially  if these  assumptions  prove
invalid. Significant factors, while not all inclusive, are:

o   The possibility of increasing competition in the Company's market place.

o   The potential for changes in technology and industry.

o   The risks  associated  with long  sales  cycles  and  inability  to  predict
    quarterly results.

OVERVIEW

The Company  generates  revenues  primarily  from software  licenses and sale of
hardware products and, to a lesser extent,  consulting and related services. The
Company  anticipates  that  revenues  from  products  will  continue  to be  the
principal source of the Company's total revenues.





















                                       21
<PAGE>

RESULTS OF OPERATIONS

The  following  table sets  forth  certain  statement  of  operations  data as a
percentage of revenues for the periods indicated:

<TABLE>
<CAPTION>
                                                                  Year ended December 31,
                                                         ------------------------------------------
                                                              1998           1999         2000
                                                         ----------      ---------    -------------
       Revenues:

<S>                                                         <C>           <C>         <C>
       Products                                               92.6%          69.0%        73.7%

       Consulting and services                                 7.4           31.0         26.3
                                                             -----          -----        -----
       Total revenues                                        100.0          100.0        100.0
                                                             -----          -----        -----

       Cost of revenues:

       Products                                               25.9           19.6          9.7

       Consulting and services                                 1.1            2.8          2.7
                                                             -----          -----        -----
       Total cost of revenues                                 27.0           22.4         12.4
                                                             -----          -----        -----
       Gross profit                                           73.0           77.6         87.6

       Operating expenses:

       Sales and marketing                                   116.7          134.5        136.1

       General and administrative                             62.2           62.8         77.2

       Research and development                               41.9           57.4         75.6
                                                             -----          -----        -----
       Total operating expenses                              220.8          257.4        288.9
                                                             -----          -----        -----

       Operating loss                                       (147.8)        (177.1)      (201.3)

       Other (expense) income:

       Interest expense                                       (1.1)         (13.6)        (0.5)

       Interest income                                         2.0            3.3          7.2
                                                             -----          -----        -----
       Total other expenses                                    0.9          (10.3)         6.7
                                                             -----          -----        -----

       Loss before extraordinary item                       (146.9)        (187.4)      (194.6)

       Extraordinary loss - early extinguishment of debt        --           (7.5)          --
                                                             -----          -----        -----

       Net loss                                             (146.9)        (194.9)      (194.6)

       Dividend on preferred stock                             1.8            5.5          8.1

       Deemed dividend on preferred stock                      1.6             --           --
                                                             -----          -----        -----
       Loss attributable to holder of Common Stock          (150.3)%       (200.4)%     (202.7)%
                                                            =======        =======      =======
</TABLE>


                                                 22
<PAGE>

COMPARISON OF YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000

REVENUES

Total revenues decreased from approximately  $6,260,000 in 1998 to approximately
$4,966,000 in 1999 and to approximately $4,554,000 in 2000. Product revenues are
derived  principally from software  licenses and the sale of hardware  products.
Product   revenues   decreased   from   approximately   $5,799,000  in  1998  to
approximately  $3,427,000 in 1999, and to approximately  $3,356,000 in 2000. The
principal  reason for the decrease  from 1998 to 1999 and to 2000 was  declining
sales of the Company's  SmartWall  products and hardware  turnkey  systems.  The
decrease in product revenues from 1999 to 2000 was partially offset by increased
sales of the Company's SmartGate product.

Consulting and services revenues are derived  principally from fees for services
complementary to the Company's products,  including consulting,  maintenance and
training. Consulting and services revenues increased from approximately $461,000
in 1998 to  approximately  $1,538,000  in 1999,  but  declined to  approximately
$1,198,000 in 2000. In 1999,  the Company  implemented a major drive to focus on
renewing maintenance contracts to allow customers to upgrade to current versions
of software. This resulted in incremental revenue from the point of the lapse in
service  to the  current  period.  In  addition,  resolution  was  reached on an
agreement with a partner,  which included  recognition of maintenance revenue of
approximately $386,000 for services performed by the Company.

COST OF REVENUES

Total cost of revenues as a percentage of total  revenues were 27.0%,  22.4% and
12.4% in 1998, 1999 and 2000, respectively.

Cost of product revenues consists principally of the costs of computer hardware,
licensed  technology,  manuals and labor  associated with the  distribution  and
support of the Company's  products and shipping costs.  Cost of product revenues
decreased from  approximately  $1,623,000 in 1998 to  approximately  $974,000 in
1999 and to  approximately  $442,000  in 2000.  Cost of  product  revenues  as a
percentage  of product  revenues was 28.0%,  28.4% and 13.2% for 1998,  1999 and
2000,   respectively.   The  dollar  and  percentage   decreases  in  2000  were
attributable  to a  higher  mix of  SmartGate  software  licenses  to  SmartWall
products and turnkey hardware sales.

Cost of consulting and services revenues  consists  principally of personnel and
related costs incurred in providing consulting, support and training services to
customers. Cost of consulting and services revenues increased from approximately
$68,000 in 1998 to $137,000 in 1999, but declined to  approximately  $122,000 in
2000. Cost of consulting and services revenues as a percentage of consulting and
services   revenues  was  14.8%,  8.9%  and  10.2%  for  1998,  1999  and  2000,
respectively. The percentage decrease from 1998 to 1999 was principally due to a
higher revenue from  maintenance  contracts and a reduced emphasis on consulting
and a greater  concentration  on training and support.  The percentage  increase
from 1999 to 2000  relates to a larger  portion  of third  party  products  with
proportionately higher support costs.

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 decreased from approximately  $7,306,000 in 1998 to
approximately   $6,683,000  in  1999  and  decreased  further  to  approximately
$6,198,000  in 2000.  Sales and  marketing  expenses  as a  percentage  of total
revenues were 116.7%,  134.5% and 136.1% in 1998,  1999 and 2000,  respectively.
The dollar decreases in 1999 and 2000 were principally due to personnel turnover
and lower levels of advertising and promotion expenses.  The percentage increase
in 1999 was due to lower  revenue  as  compared  to 1998.  Sales  and  marketing


                                       23
<PAGE>

expenses are expected to increase in the near term as a result of the  Company's
efforts to increase  awareness of new point product  introductions and strategic
alliances.

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  decreased  from
approximately  $3,896,000  in 1998 to  approximately  $3,119,000  in  1999,  and
increased  to  approximately  $3,517,000  in 2000.  General  and  administrative
expenses as a percentage of total revenues were 62.2%,  62.8% and 77.2% in 1998,
1999 and 2000,  respectively.  The decrease in expense in 1999 is due in part to
the 1998 non-cash compensation charge on the warrants, lower fees for recruiting
and  relocation  and a decrease  in the  allowance  for bad debts  expense.  The
increase in expense in 2000 resulted from higher  professional  fees and certain
non-recurring   severance  costs.  The  Company  anticipates  that  general  and
administrative  expenses,  as a percent  of  revenue,  will  decrease  in future
periods.

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  $2,619,000  in 1998 to  approximately  $2,849,000  in 1999 and to
approximately  $3,440,000  in  2000.  Research  and  development  expenses  as a
percentage of total revenues were 41.9%, 57.4% and 75.6% in 1998, 1999 and 2000,
respectively.  The  dollar  and  percentage  increases  in 1999  and  2000  were
primarily  due to increases in the number of personnel and  consulting  services
associated with the Company's product development  efforts. The Company believes
that a continuing  commitment to research and  development is required to remain
competitive.   Accordingly,   the  Company   intends  to  continue  to  allocate
substantial resources to research and development,  but research and development
expenses may vary as a percentage of total revenues.

Interest  Income and Expense -- Interest  income  represents  interest earned on
cash,  cash   equivalents  and  marketable   securities.   Interest  income  was
approximately  $125,000 in 1998, $165,000 in 1999 and approximately  $330,000 in
2000. Interest income was derived primarily from interest earned on the proceeds
from the  Company's  private  placements  and stock option  exercises.  Interest
expense  represents  interest  payable  or  accreted  on  promissory  notes  and
capitalized  lease  obligations.  Interest  expense was  approximately  $65,000,
$676,000 and $26,000 in 1998, 1999 and 2000, respectively. The large increase in
interest  expense  in  1999  relates  to  financing  costs  attributable  to the
Company's secured loan (see Note 3 to the Financial  Statements) to Transamerica
Business Credit Corporation ("TBCC").  The total costs including interest on the
loan  proceeds,  transactions  costs,  costs to  prepay  the  loan  prior to the
maturity  date  and  the  cost  of  warrants  issued  in  conjunction  with  the
Transamerica note amounted to approximately $1,000,000 in 1999.

Income  Taxes -- The Company did not incur  income tax  expenses in December 31,
1998,  1999 and 2000 as a result of the net loss incurred  during these periods.
As of December 31, 2000,  the Company had net operating  loss carry  forwards of
approximately $42,160,000 as a result of net losses incurred since inception.

Dividend on Series C Stock -- The Company provided  approximately $272,000 for a
dividend on the Series C Stock during 1999, and approximately $370,000 for 2000.
This compares to  approximately  $111,000  provided for in 1998 for the Series A
Stock.  All of the Series A Stock was  retired in  November  1998.  The Series B
Stock bears no dividend.

Deemed  Dividend  on Series A Stock -- In 1998,  the  Company  recorded a deemed
dividend of $103,000 on the Series A Stock,  in accordance  with the  Securities
and Exchange  Commission's  position on accounting  for preferred  stock that is
convertible  at a discount to the market  price for Common  Stock.  The Series A
Stock was redeemed in 1998.



                                       24
<PAGE>

LIQUIDITY AND SOURCES OF CAPITAL

The  Company's  operating  activities  used  cash of  approximately  $6,642,000,
$9,263,000 and  $6,677,000 in 1998,  1999 and 2000,  respectively.  Cash used in
operating  activities  was  principally  a result of net losses  and  changes in
assets and liabilities, non-cash expenses related to depreciation,  amortization
and issuance of warrants and options and deferred  financing costs. The decrease
in net cash used in  operating  activities  from 1999 to 2000 was due in part to
large increases in deferred  revenue and decreases in prepaid expenses and other
assets.  The large  increase  in 1999 was due in part to a  significant  drop in
accounts payable and deferred revenue.

During the year ended  December 31, 2000, 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 issued
274,967  shares  Common  Stock at a purchase  price of $3.64 per share to Citrix
Systems, Inc. in exchange for $1,000,000.

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,  in  February  2001 the  Company  completed a
private  placement  of equity in the amount of  approximately  $7.0  million and
completed  the sale of its 6.8%  holding  in the  stock  of NFR  Security,  Inc.
(formerly Network Flight Recorder) in March 2001 for approximately  $1.6 million
in net  proceeds.  The Company  believes it has the  necessary  capital funds to
sustain  operations  through  March 31, 2002 and to maintain  capital  needed to
satisfy listing requirements on the NASDAQ Small Cap Market.

The Company had net tangible  asset  balance of  $7,842,000  and  $2,722,000  at
December 31, 1999 and 2000, respectively.

Net capital expenditures for property and equipment were approximately $322,000,
$176,000 and $774,000 in 1998, 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 capital
expenditures  decreased in 1999 but  increased in 2000 as the Company  purchased
computers  and  equipment  off an expiring  three-year  lease,  and  acquired an
integrated sales opportunity management software system for increased efficiency
and visibility within the organization.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company is not exposed to a variety of market risks such as  fluctuations in
currency  exchange rates or Interest  rates.  All of the Company's  products are
invoiced  in U.S.  dollars.  The  Company  does  not  hold  any  derivatives  or
marketable securities.










                                       25
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                                V-ONE CORPORATION

                          INDEX TO FINANCIAL STATEMENTS

                                         --------



    Report of Independent Auditors                                            27

    Report of PricewaterhouseCoopers LLP, Independent Auditors                28

    Balance Sheets                                                            29

    Statements of Operations                                                  30

    Statements of Stockholders' Equity                                        31

    Statements of Cash Flows                                                  32

    Notes to Financial Statements                                             33

    Schedule of Valuation and Qualifying Accounts for the years ended
         December 31, 1998, 1999 and 2000                                     51













                                       26
<PAGE>

                         Report of Independent Auditors

      Board of Directors and Stockholders
      V-ONE Corporation

      We have audited the accompanying balance sheets of V-ONE Corporation as of
      December  31, 2000 and 1999,  and the related  statements  of  operations,
      stockholders'  equity, and cash flows for the years then ended. Our audits
      also  included  the  financial  statement  schedule  for the  years  ended
      December  31,  2000 and 1999  listed  in the  Index at Item  14(a).  These
      financial  statements and schedule are the responsibility of the Company's
      management. Our responsibility is to express an opinion on these financial
      statements and schedule based on our audits.

      We conducted our audits in accordance  with auditing  standards  generally
      accepted in the United States.  Those  standards  require that we plan and
      perform  the  audit to  obtain  reasonable  assurance  about  whether  the
      financial statements are free of material misstatement.  An audit includes
      examining,   on  a  test  basis,   evidence  supporting  the  amounts  and
      disclosures in the financial statements.  An audit also includes assessing
      the  accounting   principles  used  and  significant   estimates  made  by
      management,   as  well  as  evaluating  the  overall  financial  statement
      presentation.  We believe that our audits  provide a reasonable  basis for
      our opinion.

      In our opinion, the financial statements referred to above present fairly,
      in all material  respects,  the financial position of V-ONE Corporation at
      December 31, 2000 and 1999, and the results of its operations and its cash
      flows for the years then ended, in conformity  with accounting  principles
      generally accepted in the United States. Also, in our opinion, the related
      financial  statement  schedule  for the years ended  December 31, 2000 and
      1999, when considered in relation to the basic financial  statements taken
      as a whole,  presents fairly in all material  respects the information set
      forth therein.

                                                      /s/ Ernst & Young LLP

      McLean, Virginia
      February 9, 2001















                                       27
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of V-ONE Corporation

In our  opinion,  the  financial  statements  listed in the  accompanying  index
present  fairly,  in all  material  respects,  the  financial  position of V-ONE
Corporation  (the  Company)  at  December  31,  1998,  and  the  results  of its
operations,  changes in  stockholders'  equity,  and its cash flows for the year
then ended in conformity with accounting  principles  generally  accepted in the
United States of America.  These financial  statements are the responsibility of
the Company's  management;  our responsibility is to express an opinion on these
financial  statements  based  on our  audit.  We  conducted  our  audit of these
statements  in  accordance  with auditing  standards  generally  accepted in the
United  States of America,  which  require that we plan and perform the audit to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audit provides a reasonable  basis for the opinion  expressed above. We have not
audited the financial  statements of V-ONE Corporation for any period subsequent
to December 31, 1998.

The  financial  statements  referred to above have been  prepared  assuming  the
Company will continue as a going concern. As shown in these financial statements
during 1998 the Company incurred significant losses of $9,193,396, and had a net
working capital deficit position of $1,277,368 at December 31, 1998. These facts
raise  substantial  doubt  about the  Company's  ability to  continue as a going
concern.  The  financial  statements do not include any  adjustments  that might
result from the outcome of this uncertainty.

                                            /s/ PricewaterhouseCoopers LLP





McLean, VA
March 11, 1999 except as in the third
and fourth sentences of the first paragraph
of Note 3, to which the date is March 31, 1999.









                                       28
<PAGE>

<TABLE>
<CAPTION>
                                          V-ONE CORPORATION
                                           BALANCE SHEETS

                                                                                  December 31,
                                                                         --------------------------------
                                    ASSETS                                    2000               1999
                                                                              ----               ----
<S>                                                                    <C>              <C>
         Current assets:
              Cash and cash equivalents                                $     2,949,398  $      7,136,943
              Accounts receivable, less allowances of $105,664
                   and $134,244,  respectively                                 776,845           854,853
              Inventory, less allowances of $78,656 and
                   $87,694, respectively                                       172,177            46,087
              Prepaid expenses and other current assets                        254,631           249,339
                                                                         --------------  ----------------
                  Total current assets                                       4,153,051         8,287,222

         Property and equipment, net
         Other assets                                                          929,398           585,708
                                                                               368,169           902,506
                                                                         --------------  ----------------
                     Total assets                                      $     5,450,618 $       9,775,436
                                                                         ==============  ================

                     LIABILITIES AND STOCKHOLDERS' EQUITY

         Current liabilities:
              Accounts payable and accrued expenses                    $     1,375,939 $       1,157,660
              Deferred revenue                                               1,113,202           420,922
              Capital lease obligations - current                               71,943            78,794
                                                                         --------------  ----------------
                   Total current liabilities                                 2,561,084         1,657,376
             Deferred rent                                                     120,150           156,711
             Capital lease obligations - noncurrent                             47,803           119,746
                                                                         --------------  ----------------
                   Total liabilities                                         2,729,037         1,933,833

         Commitments and contingencies

         Stockholders' 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)                           55               335
             Common Stock, $0.001 par value; 50,000,000 shares
                 authorized; 22,109,185 and 18,233,780 shares
                 issued and outstanding, respectively                           22,109            18,233
             Accrued dividends payable                                         180,911           272,245
             Additional paid-in capital                                     51,393,818        47,197,893
             Subscriptions receivable                                                -            (3,785)
             Accumulated deficit                                           (48,876,600)      (39,644,606)
                                                                         --------------  ----------------
                             Total stockholders' equity                      2,721,581         7,841,603
                                                                         --------------  ----------------
                             Total liabilities and stockholders'       $     5,450,618   $     9,775,436
                             equity                                      ==============  ================

                    The accompanying notes are an integral part of these financial statements.
</TABLE>

                                                                29
<PAGE>

<TABLE>
<CAPTION>
                                          V-ONE CORPORATION
                                      STATEMENTS OF OPERATIONS

                                                                Year ended December 31,
                                                 -------------------------------------------------------
                                                     2000                1999               1998
                                                     ----                ----               ----
<S>                                            <C>                 <C>                <C>
           Revenues:
                Products                       $     3,356,086     $     3,427,422    $     5,798,542
                Consulting and services              1,197,544           1,538,258            461,263
                                                 -------------------------------------------------------
                    Total revenues                   4,553,630           4,965,680          6,259,805

           Cost of revenues:
                Products                               441,752             973,866          1,623,396
                Consulting and services                122,107             137,281             68,060
                                                 -------------------------------------------------------
                    Total cost of revenues             563,859           1,111,147          1,691,456
                                                 -------------------------------------------------------

           Gross profit                              3,989,771           3,854,533          4,568,349

           Operating expenses:
                Sales and marketing                  6,198,146           6,683,039          7,306,279
                General and administrative           3,517,068           3,118,829          3,896,210
                Research and development             3,440,397           2,848,955          2,618,914
                                                 -------------------------------------------------------
                    Total operating expenses        13,155,611          12,650,823         13,821,403
                                                 -------------------------------------------------------

           Operating loss                           (9,165,840)         (8,796,290)        (9,253,054)

           Interest (expense) income:
                Interest expense                       (25,945)           (676,443)           (65,372)
                Interest income                        329,770             164,841            125,030
                                                 -------------------------------------------------------
                Total interest (expense)               303,825            (511,602)            59,658
                income                           -------------------------------------------------------

           Loss before extraordinary item           (8,862,015)         (9,307,892)        (9,193,396)

           Extraordinary item - early
                extinquishment of debt                       -            (372,052)                 -
                                                 -------------------------------------------------------

           Net loss                                 (8,862,015)         (9,679,944)        (9,193,396)

           Dividend on preferred stock                 369,979             272,245            110,879
           Deemed dividend on preferred stock                -                    -           102,755
                                                 -------------------------------------------------------

           Net loss attributable to holders
                of common stock                  $  (9,231,994)    $    (9,952,189)   $    (9,407,030)
                                                 =======================================================

           Basic and diluted loss per share
                Loss before extraordinary        $       (0.44)    $         (0.57)   $         (0.68)
                item
                                                 =======================================================
                Net loss attributable to
                    holders of common stock      $       (0.44)    $         (0.59)   $         (0.68)
                                                 =======================================================
           Weighted average number of
                 common shares outstanding          20,871,076          16,938,205         13,898,450
                                                 =======================================================

                    The accompanying notes are an integral part of these financial statements.
</TABLE>




                                                                30
<PAGE>

<TABLE>
<CAPTION>
                                          V-ONE CORPORATION
                                  STATEMENTS OF STOCKHOLDERS EQUITY

                                                  Series B & C    Accrued  Additional
                                Common Stock     Preferred Stock  Dividend  Paid-in   Subscriptions Accumulated
                              Shares     Amount   Shares  Amount  Payable   Capital     Receivable    Deficit       Total
                              ------     ------   ------  ------  -------   -------     ----------    -------       -----
<S>                          <C>         <C>     <C>      <C>     <C>      <C>            <C>        <C>           <C>
Balance, December  31, 1997  13,070,235  $13,070       -      -        -   $24,649,538    $(166,011) $(20,285,387)  $4,211,210
Issuance of common stock,
   net of issuance costs      2,535,000    2,535       -      -        -     4,532,554             -            -    4,535,089
Exercise of common stock
   options                      189,333      189       -      -        -       273,228             -            -      273,417
Conversion of mandatorily
   redeemable preferred
   stock to common stock        720,670      721       -      -        -     1,537,279             -            -    1,538,000
Redemption of mandatorily
   redeemable preferred              -         -       -      -        -    (1,011,716)            -            -   (1,011,716)
   stock
Retirement of common stock      (37,192)     (37)      -      -        -      (115,953)     115,990             -            -
Deemed dividend on
   preferred stock                   -         -       -      -        -       102,755             -     (102,755)           -
Dividend on preferred stock          -         -       -      -        -           -               -     (110,879)    (110,879)
Issuance of common stock
   warrants                          -         -       -      -        -       394,000             -            -      394,000
Net loss                                               -      -        -           -                   (9,193,396)  (9,193,396)
                             -------------------------------------------------------------------------------------------------
Balance, December 31, 1998   16,478,046   16,478       -      -        -    30,361,685      (50,021)  (29,692,417)     635,725
Exercise of common stock
   options, net of issuance
   costs                        848,629      848       -      -        -     2,669,882             -            -    2,670,730
Exercise of warrants            907,105      907       -      -        -     2,863,001             -            -    2,863,908
Issuance of Series B
   preferred stock, net
   issuance costs                    -         - 1,287,554 $1,288      -     2,981,212             -            -    2,982,500
Issuance of Series C
   preferred stock, net of
   issuance costs                    -         -   335,000    335      -     7,918,349             -            -    7,918,684
Collection and forgiveness
   of subscriptions
   receivable                        -         -       -      -        -           -          46,236            -       46,236
Issuance of common stock
   warrants                          -         -       -      -        -       310,000             -            -      310,000
Dividend on preferred stock          -         -       -      -   $272,245           -             -     (272,245)           -
Issuance of common stock
   options to consultants            -         -       -      -        -        93,764             -            -       93,764
Net loss                             -         -       -      -        -             -             -   (9,679,944)  (9,679,944)
                             -------------------------------------------------------------------------------------------------
Balance, December 31,1999    18,233,780   18,233 1,622,554  1,623  272,245  47,197,893        (3,785) (39,644,606)   7,841,603
Issuance of common stock,
   net of issuance costs        915,596      915       -      -        -     3,472,190                          -    3,473,105
Exercise of common stock
   options, net of issuance
   costs                         59,500       60       -      -        -       169,637             -            -      169,697
Conversion of Series C
   preferred stock to
   common stock               2,900,309    2,901  (280,286)  (280)(461,313)    458,676             -            -          (16)
Collection of notes
   receivable for stock              -         -       -      -        -           -           3,785            -        3,785
Dividends on preferred stock                                       369,979                               (369,979)           -
Issuance of common stock
   options to consultants            -         -       -      -        -        95,422             -            -       95,422
Net loss                                                                                               (8,862,015)  (8,862,015)
                             -------------------------------------------------------------------------------------------------
Balance, December 31, 2000   22,109,185  $22,109 1,342,268 $1,343 $180,911 $51,393,818             - $(48,876,600)  $2,721,581
                             =================================================================================================

                         The accompanying notes are an integral part of these financial statements.
</TABLE>




                                                              31
<PAGE>

<TABLE>
<CAPTION>
                                          V-ONE CORPORATION
                                      STATEMENTS OF CASH FLOWS

                                                                   Year ended December 31,
                                                    ------------------------------------------------------
                                                         2000              1999               1998
                                                         ----              ----               ----
<S>                                                   <C>               <C>              <C>
     Cash flows from operating activities:
        Net loss                                      $ (8,862,015)     $ (9,679,944)    $ (9,193,396)
       Adjustments to reconcile net loss to net
          cash used in operating activities:
          Depreciation                                     429,939           464,879          354,187
          Amortization                                           -           255,378          283,056
          Loss on disposal of assets                             -                 -           95,228
          Amortization of deferred financing costs               -           730,000                -
          Forgiven subscription receivable                       -            46,114                -
          Noncash charge related to issuance of
              warrants and options                         377,422            93,764          394,000
     Changes in operating assets and liabilities:
          Accounts receivable, net                          78,008          (341,632)         281,174
          Inventory, net                                  (126,090)          339,394          198,413
          Prepaid expenses and other assets                529,045           105,755           (66,153)
          Accounts payable and accrued expenses            218,279          (966,496)          972,567
          Deferred revenue                                 692,280          (467,373)           75,648
          Deferred rent                                    (36,561)          156,711           (36,879)
                                                    --------------------------------------------------
              Net cash used in operating activities     (6,699,693)       (9,263,450)       (6,642,155)

     Cash flows from investing activities:
          Net purchases of property and equipment         (773,629)         (176,033)         (322,387)
          Collection of subscription receivable              3,785               122                -
                                                    --------------------------------------------------
              Net cash used in investing activities       (769,844)         (175,911)        (322,387)

     Cash flows from financing activities:
          Issuance of common stock                               -                 -        5,070,000
          Issuance of preferred stock, net of
                subscriptions receivable                 3,375,000        11,793,750                -
          Payment of debt financing costs                        -          (420,000)               -
          Payment of preferred stock dividends                 (16)                -         (110,879)
          Payment of stock issuance costs                 (183,895)         (941,875)        (574,324)
          Redemption of preferred stock                          -                 -       (3,200,600)
          Exercise of stock options and warrants           169,697         5,583,946          273,417
          Principal payments on capital lease
            obligations                                    (78,794)          (70,217)         (43,675)
          Repayment of notes payable                             -            (5,259)         (16,963)
                                                    --------------------------------------------------
              Net cash provided by financing             3,281,992        15,940,345        1,396,976
              activities                            --------------------------------------------------

     Net (decrease) increase in cash and cash
         equivalents                                    (4,187,545)        6,500,984       (5,567,566)
     Cash and cash equivalents, beginning of year        7,136,943           635,959        6,203,525
                                                    --------------------------------------------------

     Cash and cash equivalents, end of year            $ 2,949,398       $ 7,136,943       $  635,959
                                                    ==================================================

                  The accompanying notes are an integral part of these financial statements.
</TABLE>


                                                                32
<PAGE>
                                V-ONE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

1.    NATURE OF BUSINESS

      V-ONE  Corporation  (the  "Company")  develops,  markets  and  licenses  a
      comprehensive suite of network security products that enable organizations
      to conduct secured electronic  transactions and information exchange using
      private enterprise networks and public networks, such as the Internet. The
      Company's  principal  market is the United States,  with  headquarters  in
      Maryland, with secondary markets located in Europe and Asia.

2.    SIGNIFICANT ACCOUNTING POLICIES

      REVENUE RECOGNITION

      The Company  develops,  markets,  licenses and supports  computer software
      products and provides related  services.  The Company conveys the right to
      use the software products to customers under perpetual license agreements,
      and  conveys  the rights to product  support  and  enhancements  in annual
      maintenance agreements.  The Company recognizes revenue upon deployment of
      the  software  directly  to an  end-user or a  value-added  reseller.  The
      Company defers and recognizes  maintenance  and support  services  revenue
      over the term of the contract  period,  which is generally  one year.  The
      Company  recognizes  training  and  consulting  services  revenue  as  the
      services are provided. The Company generally expenses sales commissions as
      the related revenue is recognized and pays sales  commissions upon receipt
      of payment from the customer.

      In addition to its direct sales effort,  the Company licenses its products
      through a network of  distributors.  The Company  does not record  revenue
      until the distributor has delivered the licenses to end-user customers and
      the end-user customers have registered the software with the Company.  The
      Company also records revenue when the software is deployed directly to the
      end-user customer on behalf of the distributor.

      In certain instances, as appropriate, the Company recognizes revenues from
      the sale of systems using the percentage of completion  method as the work
      is performed,  measured  primarily by the ratio of labor hours incurred to
      total  estimated  labor hours for each specific  contract.  When the total
      estimated cost of a contract is expected to exceed the contract price, the
      total  estimated  loss is  charged  to  expense  in the  period  when  the
      information becomes known.

      In 2000,  the Company  entered  into a contract  which  contains  multiple
      elements,  including  specified  upgrades.  Because  the  Company  has not
      established vendor specific objective evidence for the specified upgrades,
      all revenues  under the contract  will be deferred  until the upgrades are
      delivered.  At December  31,  2000,  the Company had  $500,000 in deferred
      revenue related to this contract.

      The Company's  revenue  recognition  policies for the years ended December
      31, 1998,  1999 and 2000 are in conformity  with the Statement of Position
      97-2,  "Software  Revenue  Recognition"  (SOP  97-2),  promulgated  by the
      American Institute of Certified Public Accountants.

      SHIPPING AND HANDLING FEES AND COSTS

      In September  2000, the Emerging  Issues Task Force (EITF) reached a final
      consensus on EITF Issue 00-10,  "Accounting for Shipping and Handling Fees
      and Costs." This consensus  requires that all amounts billed to a customer
      in a sale transaction related to shipping and handling,  if any, represent
      revenue and should be classified as revenue.  The Company historically has


                                       33
<PAGE>

                                V-ONE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

      classified  shipping charges to customers as revenue.  With respect to the
      classification  of costs related to shipping and handling  incurred by the
      seller,  the EITF determined that the  classification  of such costs is an
      accounting  policy  decision  that  should be  disclosed.  The Company has
      classified both inbound and outbound shipping charges as cost of sales.

      RESEARCH AND DEVELOPMENT AND SOFTWARE DEVELOPMENT COSTS

      Software  development  costs are included in research and  development and
      are expensed as incurred.  Statement of Financial Accounting Standards No.
      86,  "Accounting for the Cost of Computer  Software to be Sold,  Leased or
      Otherwise  Marketed"  requires  the  capitalization  of  certain  software
      development costs once technological feasibility is established, which the
      Company generally defines as completion of a working model. Capitalization
      ceases when the products are available  for general  release to customers,
      at  which  time   amortization  of  the  capitalized  costs  begins  on  a
      straight-line  basis over the  estimated  product life, or on the ratio of
      current  revenues  to  total  projected  product  revenues,  whichever  is
      greater. To date, the period between achieving  technological  feasibility
      and the general availability of such software has been short, and software
      development costs qualifying for capitalization have been insignificant.

      USE OF ESTIMATES

      The  preparation  of financial  statements  in conformity  with  generally
      accepted  accounting  principles requires management to make estimates and
      assumptions that affect the amounts  reported in the financial  statements
      and accompanying notes. Actual results could differ from those estimates.

      CASH AND CASH EQUIVALENTS

      The  Company  considers  all highly  liquid  investments  with an original
      maturity of three months or less when  purchased  to be cash  equivalents.
      Cash and cash equivalents include time deposits with commercial banks used
      for temporary cash management purposes.

      INVENTORIES

      Inventories  are  valued  at the  lower  of cost  or  market  and  consist
      primarily of computer equipment for sale on orders received from customers
      and other vendor's software  licenses held for resale.  Cost is determined
      based on specific identification.

      PROPERTY AND EQUIPMENT

      Property and equipment are stated at historical  cost and are  depreciated
      using the  straight-line  method over the shorter of the assets' estimated
      useful life or the lease term, ranging from three to seven years.  Capital
      leases are  recorded at their net present  value on the  inception  of the
      lease.  Depreciation  expense was $429,939,  $464,879 and $354,187 for the
      years ended December 31, 2000, 1999 and 1998, respectively.

      ADVERTISING COSTS

      The  Company  expenses  all  advertising  costs as  incurred.  The Company
      incurred approximately $177,000 $98,400 and $196,000, in advertising costs
      for the years ended December 31, 2000, 1999 and 1998 respectively.



                                       34
<PAGE>

                                V-ONE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

      STOCK-BASED COMPENSATION

      Statement of  Financial  Accounting  Standards  No. 123,  "Accounting  for
      Stock-Based  Compensation"  ("SFAS"),  allows  companies  to  account  for
      stock-based  compensation either under the provisions of SFAS 123 or under
      the provisions of Accounting  Principles  Bulletin No. 25, "Accounting for
      Stock Issued to Employees"  ("APB 25"), as amended by FASB  Interpretation
      No. 44, "Accounting for Certain Transactions  Involving Stock Compensation
      (an  Interpretation  of APB  Opinion  No.  25),"  but  requires  pro forma
      disclosure  in  the  footnotes  to  the  financial  statements  as if  the
      measurement  provisions  of SFAS 123 had been  adopted.  The  Company  has
      elected to account for its stock-based compensation in accordance with the
      provisions of APB 25 (see Note 6).

      Stock options and warrants granted to  non-employees  are accounted for in
      accordance  with SFAS 123 and the Emerging Issues Task Force Consensus No.
      96-18,  "Accounting for Equity  Instruments  That Are Issued to Other Than
      Employees  for  Acquiring,  or  in  Conjunction  with  Selling,  Goods  or
      Services,"  which  requires  the value of the  options to be  periodically
      re-measured as they vest over a performance  period. The fair value of the
      options is determined using the Black-Scholes model.

      EXTRAORDINARY ITEM

      On September 30, 1999, the Company paid in full the Transamerica term loan
      prior to its maturity  (see Note 3). In connection  with the payment,  the
      Company recognized a $372,052 loss related to the early  extinguishment of
      debt.

      INCOME TAXES

      Deferred  tax assets and  liabilities  are  recognized  for the future tax
      consequences  attributable to differences  between the financial statement
      carrying  amounts of existing assets and liabilities and their  respective
      tax bases.  Deferred tax assets and  liabilities  are measured by applying
      presently enacted statutory tax rates,  which are applicable to the future
      years in which  deferred  tax assets or  liabilities  are  expected  to be
      settled or realized,  to the differences  between the financial  statement
      carrying amounts and the tax bases of existing assets and liabilities. The
      effect of a change in tax rates on deferred tax assets and  liabilities is
      recognized in net income in the period that the tax rate is enacted.

      The Company provides a valuation allowance against net deferred tax assets
      if, based upon available  evidence,  it is more likely that some or all of
      the deferred tax assets may not be realized.

      NET LOSS PER COMMON SHARE

      The Company  follows  Financial  Accounting  Standards Board Statement No.
      128,  "Earnings Per Share,"  ("SFAS 128") for computing and presenting net
      income per share  information.  Basic net loss per share was determined by
      dividing  net  loss  by the  weighted  average  number  of  common  shares
      outstanding  during each year.  Diluted net loss per share excludes common
      equivalent   shares,   unexercised  stock  options  and  warrants  as  the
      computation  would  be  anti-dilutive.  A  reconciliation  of the net loss
      available  for  common  stockholders  and the  number  of  shares  used in
      computing basic and diluted net loss per share is in Note 10.



                                       35
<PAGE>

                                V-ONE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

      BUSINESS SEGMENTS

      In 1998,  the Company  adopted FASB Statement No. 131,  "Disclosure  About
      Segments of an  Enterprise  and Related  Information,"  which  establishes
      standards for disclosures about products, geographics and major customers.
      The Company's  implementation of this standard does not have any effect on
      its financial statements, as the Company only operates in one segment.

      RISKS, UNCERTAINTIES AND CONCENTRATIONS

      Financial  instruments that potentially subject the Company to significant
      concentration  of credit risk consist  primarily of cash  equivalents  and
      accounts receivable.  The Company's cash balances exceed federally insured
      amounts. The Company invests its cash primarily in money market funds with
      an international commercial bank. The Company sells its products to a wide
      variety of  customers  in a variety of  industries.  The Company  performs
      ongoing  credit  evaluations  of  its  customers,  but  does  not  require
      collateral or other security to support customer accounts  receivable.  In
      management's  opinion, the Company has sufficiently provided for estimated
      credit losses.

      During 1998  approximately  $524,000 of goods and services were  purchased
      from two major  suppliers,  representing 32% of total 1998 product cost of
      revenues. No suppliers exceeded 10% of purchases in 1999 or 2000.

      During the years ended December 31, 2000, 1999, and 1998, 21%, 26% and 19%
      percent, respectively, related to sales to international customers. During
      the years ended  December 31, 2000,  1999,  and 1998,  40%,  35%, and 62%,
      respectively, related to sales to government agencies.

      RECLASSIFICATIONS

      Certain prior year amounts have been  reclassified  to conform to the 2000
      presentation.

      NEW ACCOUNTING STANDARDS

      In June 1998, the Financial Accounting Standards Board issued Statement of
      Financial   Accounting  Standards  No.  133,  "Accounting  for  Derivative
      Instruments and Hedging  Activities" (SFAS 133). SFAS 133 is effective for
      fiscal  years  beginning  after  June  15,  2000  and  cannot  be  applied
      retroactively.  SFAS 133  establishes  accounting and reporting  standards
      requiring  that every  derivative  instrument  be  recorded in the balance
      sheet as either an asset or liability measured at its fair value. SFAS 133
      requires  that  changes  in the  derivative's  fair  value  be  recognized
      currently in earnings unless specific hedge  accounting  criteria are met.
      The Company will adopt SFAS 133 effective January 1, 2001. The adoption is
      not expected to materially impact the Company's financial statements.

 3.   NOTES PAYABLE

      On  February  24,  1999,  the  Company  entered  into a Loan and  Security
      Agreement ("Loan Agreement") with Transamerica Business Credit Corporation
      ("Transamerica").  Under  the  terms of the Loan  Agreement,  the  Company
      received a $3.0 million term loan that bears interest at 12.53% per annum.
      Interest is payable monthly in arrears. On March 31, 1999, the Company and
      Transamerica  amended the Loan Agreement,  whereby Transamerica waived the
      event of default  created  when the  Company  received  a  "going-concern"
      opinion from its  independent  auditors.  The Company  agreed to (i) grant
      TBCC Funding Trust II, an affiliate of Transamerica, a warrant to purchase
      100,000 shares of Common Stock at an exercise price of $3.25 per share and
      (ii) accept the additional financial covenant that the Company's net worth
      would be $5.0 million at June 30, 1999 and September 30, 1999. The warrant


                                       36
<PAGE>

                                V-ONE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

      was valued at $224,000 using the  Black-Scholes  option-pricing  model and
      the following  assumptions:  dividend yield of 0%; expected  volatility of
      68%; risk-free interest rate of 5.35% and expected term of seven years.

      On June 30,  1999,  the Company  and  Transamerica  entered  into a second
      amendment,  whereby  Transamerica  (i)  waived  the  requirement  that the
      Company's  net worth be $5.0 million on June 30, 1999,  (ii)  extended the
      maturity  date of the $3.0  million  term note to  February  28,  2000 and
      removed  the  requirement  that  Transamerica  convert  the term loan to a
      revolving  loan on February  28,  2000,  and (iii)  deleted  the  $360,000
      acquisition fee. In consideration  for the second  amendment,  the Company
      (i) issued a seven-year warrant to purchase 50,000 shares of the Company's
      Common Stock at an exercise price of $3.75 per share, (ii) paid a $150,000
      fee to  Transamerica,  (iii) agreed to use 30% of any future equity raised
      by the Company  after  completion  of its current  round of  financing  to
      prepay the term loan,  (iv) agreed to pay  $100,000 per month in principal
      on the term loan beginning on September 1, 1999, and (v) agreed to pay the
      balance of the principal  and accrued and unpaid  interest due on the term
      loan on February  28,  2000.  The warrant to  purchase  50,000  shares was
      valued at $86,000  using the  Black-Scholes  option-pricing  model and the
      following  assumptions:  dividend yield of 0%; expected volatility of 68%;
      risk-free interest rate of 5.35% and expected term of seven years.

      As a result of an  anti-dilution  clause  triggered  upon the  issuance of
      Series B Convertible  Preferred  Stock,  the warrants to purchase  100,000
      shares of Common  Stock  with an  exercise  price of $3.25 per share  were
      increased  to  139,485  shares at an  exercise  price of $2.33 per  share.
      Additionally,  upon issuance of the Series C Preferred  Stock on September
      9, 1999,  the warrants to purchase  50,000  shares of Common Stock with an
      exercise  price of $3.75 per share were increased to 71,429 shares with an
      exercise price of $2.65 per share. The  Transamerica  term loan was repaid
      on September 30, 1999 and all  indebtedness  and  obligations  owed by the
      Company were terminated. The warrants are still outstanding as of December
      31, 2000.

      On  September  30,  1999,  the Company  entered  into a  Revolving  Credit
      Promissory Note (the "Note") with Citibank,  F.S.B.,  ("Citibank").  Under
      the terms of the Note,  the Company  may be  advanced  up to $3.0  million
      under a revolving  loan  agreement with a maturity date of October 1, 2000
      with the ability to renew for additional terms. The Note bears interest at
      a rate  equal to the sum of the  interest  rate paid on the  automatically
      renewable one-year  certificate of deposit plus a margin of two percentage
      points.  Interest  is payable  monthly in  arrears.  The  initial  rate of
      interest is 6.78%. Advances of $2,900,000 were made at September 30, 1999,
      which were used to pay off the  remaining  principal  on the  Transamerica
      note payable.  On December 14, 1999, the Note was repaid with the proceeds
      from a certificate of deposit, which had been the collateral for the Note.




                                       37
<PAGE>

                                V-ONE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

 4.   SELECTED BALANCE SHEET INFORMATION

      Property and equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
                                                            2000                1999
                                                       ---------------      --------------
<S>                                                  <C>                  <C>
         Office and computer equipment               $      1,426,217     $       988,041
         Office and computer equipment under
            capital leases                                    341,302             359,859
         Leasehold improvements                                89,504              62,332
         Furniture and fixtures                               310,268             120,811
                                                       ---------------      --------------
                                                            2,167,291           1,531,043
         Less:  accumulated depreciation                   (1,237,893)           (945,335)
                                                       ---------------      --------------
                                                     $        929,398     $       585,708
                                                       ===============      ==============
</TABLE>

      The Company had two licensing  agreements whereby the Company obtained the
      right to modify and sell certain  technology used in its product line. All
      amounts are fully amortized as of December 31, 1999. The Company  incurred
      amortization  expense of $0,  $255,378  and  $283,056,  relating  to these
      agreements in 2000, 1999 and 1998, respectively.

      Other assets consisted of the following at December 31:

<TABLE>
<CAPTION>
                                                                  2000              1999
                                                              -------------     --------------

<S>                                                        <C>               <C>
               Deposits                                    $       118,169   $        652,506
               Investment in Network Flight Recorder               250,000            250,000
                                                              -------------     --------------
                                                           $       368,169   $        902,506
                                                              =============     ==============
</TABLE>

      In January  1997,  the  Company  made an  investment  of  $250,000  in NFR
      Security, Inc., formerly Network Flight Recorder, Inc. ("NFR") in exchange
      for ten percent of NFR's common  stock.  NFR develops  software to provide
      network  administrators with network audit capabilities.  NFR is headed by
      the  Company's  former  chief  scientist,  who  continues  to  work  as  a
      consultant  for the  Company.  The  Company's  investment  in these equity
      securities  was  recorded  at the  fair  market  value  on the date of the
      transaction and is accounted for using the cost method. Subsequent to year
      end, the Company sold its stock in NFR for $1,625,000.

      Accounts  payable and  accrued  expenses  consisted  of the  following  at
December 31:

<TABLE>
<CAPTION>
                                                                 2000               1999
                                                            ---------------    --------------

<S>                                                       <C>                <C>
              Accounts payable                            $        580,605   $        847,267
              Accrued compensation                                 589,242            270,072
              Sales tax payable                                        247              1,936
              Other accrued expenses                               205,845             38,385
                                                            ---------------    ---------------
                                                          $      1,375,939   $      1,157,660
                                                            ===============    ===============
</TABLE>





                                       38
<PAGE>

                                V-ONE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

5.    INCOME TAXES

      The tax  effect of  temporary  differences  that give rise to  significant
      portions of the deferred income taxes are as follows at December 31:

<TABLE>
<CAPTION>
                                                                 2000               1999
                                                            ---------------    ---------------

<S>                                                       <C>                <C>
              Inventory                                   $          38,948  $         33,867
              Accounts receivable                                    40,807            51,845
              Property and equipment                                 18,203           (60,343)
              Deferred rent                                          46,402            60,522
              Non-deductible accruals                                52,631            61,320
              Options and warrants                                        -           155,991
              Net operating loss carry forward                   16,282,345        14,556,026
                                                            ---------------    ---------------
              Total deferred tax asset                          16,479,336         14,859,228
              Valuation allowance                              (16,479,336)       (14,859,228)
                                                            ---------------    ---------------
              Net deferred tax asset                      $              -   $             -
                                                            ===============    ===============
</TABLE>


      The  net  change  in the  valuation  allowance  from  1999  to 2000 is due
      principally to the increase in net operating losses.  Valuation allowances
      have been  recognized  due to the  uncertainty of realizing the benefit of
      net  operating  loss  carryforwards.  At December  31, 2000 and 1999,  the
      Company had net operating loss carryforwards of approximately  $42,200,000
      and  $37,700,000  for Federal and state income tax  purposes  available to
      offset future taxable income. The net operating loss  carryforwards  begin
      to expire in 2008.

            A  reconciliation  between income taxes computed using the statutory
      federal  income  tax  rate and the  effective  rate  for the  years  ended
      December 31, 1999 and 2000 is as follows:

<TABLE>
<CAPTION>
                                                              2000            1999
                                                           ----------     ------------

<S>                                                          <C>              <C>
          Federal income tax (benefit) at statutory rate     (34.0%)          (34.0%)
          State income taxes, net                             (4.6%)           (6.6%)
          Permanent items                                     (0.1%)          (14.6%)
          Net change in valuation allowance                   38.7%            55.2%
                                                           ----------     ------------
          Provision for Income Taxes                           0.0%             0.0%
                                                           ==========     ============
</TABLE>


 6.   SHAREHOLDERS' EQUITY

      SERIES B PREFERRED STOCK

      On June 11, 1999, the Company issued  1,287,554  shares at $2.33 per share
      of Series B  Convertible  Preferred  Stock  (the  "Series B Stock") to two
      investors for $1.0 million in cash and a  subscription  agreement for $2.0
      million.  Net proceeds to the Company after issuance costs of $17,500 were
      $2,982,500.  The subscription receivable was repaid in two installments of
      $1.0 million plus accrued  interest in July and August 1999.  The Series B
      Stock ranks senior to the Common Stock as to  distributions of assets upon
      liquidation,  dissolution or winding up of the Company. The Series B Stock
      is not  redeemable,  does not bear  dividends  and generally has no voting
      rights.  Each share of Series B Stock is  convertible at the option of the
      holder at any time into one share of Common  Stock  based  upon an initial


                                       39
<PAGE>

                                V-ONE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

      conversion  price of $2.33 per share.  The conversion  price is subject to
      adjustment in the event the Company pays dividends or makes  distributions
      on, splits or reverse splits its Common Stock. The holders of the Series B
      Stock are entitled to a liquidation preference of $2.33 per share.

      SERIES C PREFERRED STOCK

      On  September  9, 1999,  the  Company  issued  335,000  shares of Series C
      Preferred  Stock  (the  "Series C  Stock")  and  3,350,000  non-detachable
      warrants to purchase shares of the Company's Common Stock (the "Warrants")
      to certain accredited  investors.  Each share of Series C Stock was issued
      with ten Warrants  (collectively a "Unit") for a price of $26.25 per Unit.
      The  Company  received  $7,918,684  in proceeds  net of issuance  costs of
      approximately  $875,000.  The Warrants are  immediately  exercisable  at a
      price of $2.625 per share and will remain  exercisable until 90 days after
      all of the Series C Stock has been  redeemed  and the shares of the Common
      Stock underlying the Warrants have been registered for resale.

      The Series C Stock bears  cumulative  compounding  dividends  at an annual
      rate of 10% for the first five years,  12.5% for the sixth year and 15% in
      and after the seventh  year.  The dividends may be paid in cash, or at the
      option of the Company,  in shares of registered Common Stock. The Series C
      Stock is not  convertible  and ranks senior to the Common Stock and to the
      Series B Stock as to payment of dividends,  and ranks senior to the Common
      Stock and in parity with the Series B Stock as to  distributions of assets
      upon liquidation, dissolution or winding up of the Company. Holders of the
      Series C Stock are  entitled  to a  liquidation  preference  of $26.25 per
      share.

      At  least  51% of the  outstanding  shares  of  Series C Stock  must  vote
      affirmatively  as a  separate  class  for (i) the  voluntary  liquidation,
      dissolution  or  winding  up of the  Company,  (ii)  the  issuance  of any
      securities  senior to the  Series C Stock and  (iii)  the  declaration  or
      payment of a cash dividend on all junior stocks and certain  amendments to
      the Company's  certificate of incorporation.  Prior to the exercise of the
      Warrants,  the holders shall also be entitled to ten common votes for each
      share of Series C Stock 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% of the Series C Stock is  outstanding,
      the holders  shall have the right to elect one  director to the  Company's
      Board of Directors.

      The  Company  has the right to redeem the  outstanding  shares of Series C
      Stock 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  5  trading  days  prior  to the  date of  notice  of
      redemption is at least $3.9375 per share.  The  redemption  price would be
      paid in cash in full and would be equal to the  greater  of the $26.25 per
      share  purchase price or the fair market value of each Series C share plus
      all unpaid dividends.

      At any time after all of the  Warrants  have been  exercised  by a holder,
      that  holder  shall have the right to require the Company to redeem all of
      its then  outstanding  share of Series C Stock.  The redemption  price for
      each share of Series C Stock shall be the $26.25 per share  purchase price
      plus all unpaid  dividends  and is payable at the option of the Company in
      either cash or shares of Common Stock.



                                       40
<PAGE>

                                V-ONE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

      The Company has granted  registration  rights to the investors whereby the
      Company is  obligated,  in certain  instances,  to register  the shares of
      Common Stock  issuable upon  conversion of the Series B Stock and exercise
      of the Warrants attached to the Series C Stock.

      Throughout  2000,  certain holders of the Series C Stock chose to exercise
      their  warrants  through the  cashless  exercise  provision.  The cashless
      exercise  provision  allowed  the  holders to remit each share of Series C
      Stock in exchange for 10 shares of Common Stock. A total of 280,286 shares
      of Series C Stock were remitted for 2,802,860  shares of Common Stock.  An
      additional  97,449  shares were issued as a result of dividends  earned on
      the Series C Stock.  At  December  31,  2000 there were  54,714  shares of
      Series C Stock  outstanding.  The dividend  payable on these shares equals
      $180,911,  payable in cash or  equivalent  shares of Common  Stock at fair
      market value at the exercise date.

      COMMON STOCK

      In the fourth quarter of 1998, the Company  completed a private  placement
      of 2,535,000 shares of its Common Stock at a price of $2.00 per share. The
      Company incurred issuance costs of approximately  $546,000 and on November
      20, 1998,  granted a warrant to purchase  50,000 shares of Common Stock to
      the  underwriter  of the  private  placement.  The warrant has an exercise
      price of $2.125 and expires five years from the date of grant.

      On January 14, 1999, a warrant to purchase  600,000 shares of Common Stock
      was exercised in full pursuant to its cashless exercise  provision and the
      Company  issued  223,529  shares of its  Common  Stock to the  holder.  In
      addition to the  exercise of warrants  for 633,576  shares of Common Stock
      for  $2,757,658,  a warrant to purchase a total of 50,000 shares of Common
      Stock was  exercised  at $2.125 per  share.  Proceeds  from this  exercise
      totaled $106,250.  Additionally  during 1999, various employees  exercised
      848,629  options to  purchase  Common  Stock.  The  Company  received  net
      proceeds from these exercises of $2,670,730.

      In March 2000,  the Company  issued  500,000  shares of Common  Stock at a
      purchase price of $4.75 per share to in exchange for $2,375,000.

      Restricted  Common Stock amounting to 158,316 shares was issued to certain
      selected  employees as  compensation in the second quarter of 2000, 25% of
      which vested immediately,  with the remaining shares vesting over the next
      three quarters.  Upon  termination of certain  employees,  17,687 of these
      shares were  cancelled.  The shares were recorded at the fair market value
      on the date of grant,  $2.375,  with the compensation  expense of $376,000
      being recognized over the vesting period.

      In May 2000, the stockholders approved an increase in the number of shares
      of Common Stock authorized to 50,000,000.

      In June 2000,  the  Company  issued  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.

      The aggregate  stock  issuance  costs for Common Stock issued in 2000 were
      $183,895.

      WARRANTS

      In addition to the warrants  issued in  connection  with the  Transamerica
      debt for  210,914  shares  of  Common  Stock at $2.33  per  share  and the
      warrants  attached  to the Series C Stock for  3,350,000  shares of Common


                                       41
<PAGE>

                                V-ONE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

      Stock at  $2.625  per  share  discussed  above,  the  Company  issued  the
      following  warrants  to  purchase  Common  Stock  during  the years  ended
      December 31, 1998, 1999, and 2000:

      On November 21,  1997,  the Company  issued a warrant to purchase  300,000
      shares of Common Stock with an exercise  price of $3.125 to the  President
      and Chief Executive Officer. On November 27, 2000, upon the resignation of
      the former  officer an  agreement  was  reached  whereby one half of these
      warrants  were  cancelled  and  the  other  half  were  extended  to a new
      expiration  date of November 27, 2005.  Because the stock price on the new
      measurement  date was less  than the  exercise  price of the  warrant,  no
      compensation expense was recorded.

      On July 8, 1998, the Company granted warrants to purchase 10,000 shares of
      Common Stock each to two  directors of the Company.  The warrants  have an
      exercise  price of $2.688  and  expire  five years from the date of grant.
      Upon resignation of one of the directors, 10,000 warrants were cancelled.

      On November 27, 2000 the Company granted fully vested warrants to purchase
      100,000 shares of Common Stock to  MindSquared,  LLC, a related party,  as
      part of a consulting  agreement.  The warrants  have an exercise  price of
      $1.188 and expire five years from the date of grant.  The  Company  valued
      these   warrants  using  the   Black-Scholes   model  with  the  following
      assumptions:  volatility  of  123%,  risk  free  interest  rate  of 6% and
      expected term of 5 years.  The value of the warrants,  $101,000,  is being
      recognized ratably over the four-month term of the consulting agreement.

      During the year ended  December 31, 2000,  warrants to purchase  2,802,860
      shares of Common  Stock  that were  attached  to the  Series C Stock  were
      redeemed  for an equal amount of shares of Common  Stock.  Of the original
      warrants issued, 547,140 remain at an exercise price of $2.625 per share.

      Warrants to purchase shares of the Company's  Common Stock  outstanding at
      December 31, 1999 and 2000 were as follows:

                            1999               2000    Exercise Price
                            ----               ----    --------------

                               -            100,000         $1.19
                         139,485            139,485         $2.33
                       3,350,000            547,140         $2.63
                          71,429             71,429         $2.65
                          20,000             10,000         $2.69
                         300,000            150,000         $3.13
                          25,000                  -         $3.88
                          60,000             54,000         $4.73
                 ----------------     --------------
                       3,965,914          1,072,054
                 ================     ==============

            At December  31,  2000,  warrants to  purchase  1,072,054  shares of
      Common Stock were exercisable. The weighted average fair value of warrants
      granted  during 2000 was  estimated  at $1.01.  The fair market  value was
      determined using the Black-Scholes option-pricing model with the following
      assumptions:  dividend  yield 0%,  volatility of 123%,  risk free interest
      rate of 6%, and expected life of 5 years.



                                       42
<PAGE>

                                V-ONE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

      STOCK OPTIONS PLANS

      The  Company  has the  following  active  stock  options  plans:  the 1995
      Non-Statutory  Stock Option Plan,  the 1996  Incentive  Stock Plan and the
      1998 Incentive  Stock Option Plan.  These plan were adopted to attract and
      retain  key  employees,   directors,  officers  and  consultants  and  are
      administered  by the  Compensation  Committee  appointed  by the  Board of
      Directors.

      1995 NON-STATUTORY STOCK OPTION PLAN

      The Compensation Committee determined the number of options granted to key
      employees,  the vesting  period and the exercise  price provided they were
      not below market value on the date of the grant for the 1995 Non-Statutory
      Stock Option Plan ("the 1995 Plan").  In most cases, the options vest over
      a two-year period and terminate ten years from the date of grant. The 1995
      Plan will terminate during May 2005 unless  terminated  earlier within the
      provisions  of the 1995 Plan.  On June 12,  1996,  the Board of  Directors
      determined that no further options would be granted under the 1995 Plan.

      Option activity under the 1995 Plan for the three years ended December 31,
      2000 was as follows:

<TABLE>
<CAPTION>
                                                                      Weighted Average
                                                          Shares       Exercise Price
                                                          ------       --------------

<S>                                                      <C>                <C>
          Balance as of December 31, 1997                 231,223           $1.398

          Exercised                                      (158,333)          $1.213
          Cancelled                                        (8,888)          $0.425
                                                           ------
          Balance as of December 31, 1998                  64,002           $1.855


          Exercised                                       (53,400)          $1.726
                                                          -------
          Balance as of December 31, 1999                  10,602           $2.505
                                                           ======
          Balance as of December 31, 2000                  10,602           $2.505
                                                           ======
</TABLE>

      1996 INCENTIVE STOCK PLAN

      During June 1996, the Company  adopted the 1996 Incentive Stock Plan ("the
      1996 Plan"),  under which  incentive  stock options,  non-qualified  stock
      options  and  restricted  share  awards may be made to the  Company's  key
      employees,  directors,  officers and  consultants.  Both  incentive  stock
      options  and  options  that are not  qualified  under  Section  422 of the
      Internal Revenue Code of 1986, as amended ("non-qualified  options"),  are
      available  under the 1996 Plan. The options are not  transferable  and are
      subject  to  various   restrictions   outlined  in  the  1996  Plan.   The
      Compensation  Committee or the Board of Directors determines the number of
      options  granted to key employees,  officers or  consultants,  the vesting
      period and the exercise price provided that they are not below fair market
      value.  The 1996 Plan will  terminate  during June 2006 unless  terminated
      earlier by the Board of Directors.

      On February 17, 1998, the Company's Board of Directors authorized an offer
      to reset the exercise  price of all full-time  employees'  (other than the
      President   and  any  vice   presidents)   incentive   stock  options  and
      non-qualified  stock  options  granted under the 1996 Plan. If accepted by
      the option holder,  such options were replaced with non-qualified  options
      at the new exercise  price of $2.625 per share.  To have been eligible for


                                       43
<PAGE>

                                V-ONE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

      repricing,  a  participant  must:  1) have been a  full-time  employee  on
      February  17,  1998;  2) have  agreed to remain an employee of the Company
      until  August 17,  1998,  and 3) have  accepted  the offer by February 24,
      1998.

      On May 1, 1998,  the Company's  Board of Directors  authorized an offer to
      reset the exercise  price of all options  issued to the  President and any
      vice  presidents  granted  under the 1996 Plan.  If accepted by the option
      holder,  such options were replaced with non-qualified  options at the new
      exercise price of $2.875 per share. To have been eligible for repricing, a
      participant  must:  1) have been a full-time  employee on May 1, 1998;  2)
      have agreed to remain an employee of the Company  until  November 1, 1998,
      and 3) have accepted the offer by May 8, 1998.

      Option activity under the 1996 Plan for the three years ended December 31,
      2000 was as follows:

<TABLE>
<CAPTION>
                                                                            Weighted Average
                                                            Shares           Exercise Price
                                                         -------------    ---------------------
<S>                                                           <C>                <C>
             Balance as of December 31, 1997                  1,972,035          $4.243

             Granted                                            558,667          $2.780
             Exercised                                          (35,000)         $2.625
             Expired                                           (613,326)         $4.280
                                                            -------------
             Balance as of December 31, 1998                  1,882,376          $3.221

             Exercised                                         (677,479)         $3.438
             Cancelled                                         (290,666)         $2.787
             Expired                                            (99,250)         $2.785
                                                            -------------
             Balance as of December 31, 1999                    814,981          $3.268

             Exercised                                          (21,000)         $2.714
             Cancelled                                         (560,750)         $3.077
             Expired                                             (6,676)         $2.657
                                                            -------------
             Balance as of December 31, 2000                    226,555          $3.833
                                                            =============
</TABLE>

      1998 INCENTIVE STOCK OPTION PLAN

      On February 2, 1998, the Board of Directors authorized the adoption of the
      1998  Incentive  Stock Option Plan (the "1998  Plan").  The purpose of the
      1998 Plan is to provide for the  acquisition of an equity  interest in the
      Company  by   non-employee   directors,   officers,   key   employees  and
      consultants. The 1998 Plan will terminate February 2, 2008.

      Incentive  stock options may be granted to purchase shares of Common Stock
      at a price  not less  than fair  market  value on the date of grant.  Only
      employees  may  receive  incentive  stock  options;  all  other  qualified
      participants  may receive  non-qualified  stock  options  with an exercise
      price  determined  by a  Committee  or the Board.  Options  are  generally
      exercisable  after one or more  years and  expire no later  than ten years
      from the date of grant. The 1998 Plan also provides for reload options and
      restricted share awards to employee and consultant participants subject to
      various terms.




                                       44
<PAGE>

                                V-ONE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

      Option activity under the 1998 Plan for the three years ended December 31,
      2000 was as follows:

<TABLE>
<CAPTION>
                                                                       Weighted Average
                                                      Shares            Exercise Price
                                                      ------            --------------
<S>                                                     <C>                <C>

          Balance as of December 31, 1997                       -               -

          Granted                                         712,000          $2.694
          Exercised                                             -               -
          Cancelled                                      (101,000)         $2.688
                                                   --------------
          Balance as of December 31, 1998                 611,000          $2.695


          Granted                                       1,641,500          $2.328
          Exercised                                      (117,750)         $2.530
          Cancelled                                      (437,000)         $2.507
          Expired                                          (7,500)         $2.688
                                                   --------------
          Balance as of December 31, 1999               1,690,250          $2.400

          Granted                                       1,783,780          $2.224
          Exercised                                       (32,500)         $2.595
          Cancelled                                      (818,975)         $2.723
          Expired                                          (8,500)         $2.283
                                                   --------------
          Balance as of December 31, 2000               2,614,055          $2.178
                                                   ==============
</TABLE>

      Awards  may be  granted  under the 1998 Plan  with  respect  to a total of
      5,000,000 shares of Common Stock.

      For all of its plans,  the Company measures  compensation  expense for its
      employee  stock-based  compensation  using the intrinsic  value method and
      provides pro forma disclosures of net loss as if the fair value method had
      been applied in measuring  compensation expense. Under the intrinsic value
      method of accounting for stock-based compensation, when the exercise price
      of  options  granted  to  employees  is less  than the  fair  value of the
      underlying  stock  on the date of  grant,  compensation  expense  is to be
      recognized over the applicable vesting period. The effect of applying SFAS
      123's  fair  value  method  to the  Company's  stock  based  awards is not
      necessarily  representative  of the  effects  on  reported  net income for
      future years, due to, among other things,  the vesting period of the stock
      options and the fair value of additional stock options in future years.

<TABLE>
<CAPTION>
                                                                 Year ended December 31,
                                                   ----------------------------------------------------
                                                        2000              1999               1998
                                                   ---------------    --------------    ---------------
<S>                                                   <C>               <C>               <C>
           Loss attributable to holders of
           common stock:
                   As reported                         $9,231,994        $9,952,189        $ 9,407,030
                   Pro forma                          $10,277,777       $10,895,072        $10,464,134
           Basic and diluted loss per share
              attributable to holders of
              common stock
                  As reported                               $0.44             $0.59              $0.68
                  Pro forma                                 $0.53             $0.64              $0.75
</TABLE>



                                       45
<PAGE>

                                V-ONE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

      The fair value of each  option is  estimated  on the date of grant using a
      type  of   Black-Scholes   option   pricing   model  with  the   following
      weighted-average  assumptions  used for  grants  during  the  years  ended
      December 31, 1998, 1999 and 2000,  respectively:  dividend yield of 0% for
      all periods; expected volatility of 68%, 92%, and 100%; risk-free interest
      rate of 5.3%,  5.5% and 6.0%;  and expected term of 4.0 years for 1998 and
      1999,  and 3.8 years  for 2000.  The  weighted-average  fair  value of the
      options  granted under all of the  Company's  plans during the years ended
      December 31, 1998, 1999 and 2000 was $1.10, $1.60 and $1.54, respectively.
      The weighted average exercise price of the options  outstanding  under all
      of the  Company's  plans at December  31,  1998,  1999 and 2000 was $3.06,
      $2.68 and $2.31,  respectively.  As of December  31,  2000,  the  weighted
      average remaining contractual life of the options outstanding under all of
      the Company's plans is 7.6 years and the number of options  exercisable is
      1,207,925.

 7.   COMMITMENTS AND CONTINGENCIES

      LEASES

      The  Company is  obligated  under  various  operating  and  capital  lease
      agreements,  primarily for office space and equipment through 2003. Future
      minimum lease  payments under these  non-cancelable  operating and capital
      leases as of December 31, 2000 are as follows:

                                            OPERATING    CAPITAL
                                            ---------    -------

           2001                           $   612,385$   83,499
           2002                               576,590    50,059
           2003                               341,199         -
           2004                                     -         -
                                    ---------------------------------

         Total minimum payments            $1,530,174   133,558
                                           ==========
         Interest                                       (13,812)
                                                        --------

         Present value of capital lease obligations
                                                        119,746
         Less:  current portion                         (71,943)
                                                       ---------

         Capital lease obligations non-current       $   47,803
                                                     ===========

      Rent  expense was  $583,582,  $919,550  and  $701,133  for the years ended
      December 31, 2000, 1999 and 1998 respectively.

      At December 31,  2000,  the Company  expects to receive  $61,573 in future
      minimum sublease rental income payments in 2001.

      CONTINGENCIES

      On January 27, 2000, a class action  lawsuit  alleging  violations  of the
      federal  securities laws was filed in the U.S.  District Court of Maryland
      on behalf of  purchasers  of the  Company's  Common  Stock on November 30,
      1999. See Note 11.




                                       46
<PAGE>

                                V-ONE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

8.    EMPLOYEE 401(K) DEFERRED COMPENSATION PLAN

      The Company has a 401(k) plan (the "Plan") for all employees  over the age
      of  21.   Contributions  are  made  through   voluntary   employee  salary
      reductions,  up to 15% of their  annual  compensation,  and  discretionary
      matching  by  the  Company.  Employer  contributions  vest  based  on  the
      participant's  number of years of continuous  service.  A  participant  is
      fully vested after six years of continuous service. There were no employer
      contributions for the years ended December 31, 2000, 1999 or 1998.

 9.   SUPPLEMENTAL CASH FLOW DISCLOSURE

      Selected cash payments and noncash activities were as follows:

<TABLE>
<CAPTION>
                                                               Year ended December 31,
                                                    -----------------------------------------------
                                                        2000             1999             1998
                                                    -------------    --------------   -------------
<S>                                                      <C>             <C>           <C>
               Cash paid for interest                    $21,982         $728,221      $         -
               Cash paid for dividends                        16                 -               -
               Noncash investing and financing
                   activities:
               Notes repaid from return and
                   retirement of Common Stock                  -                 -         115,953
               Deemed dividend on preferred
                   stock                                       -                 -         102,755
               Issuance of stock options to
                   consultants                            95,422            93,764               -
               Issuance of restricted stock              282,000                 -               -
               Collection and forgiveness of
                   subscriptions  receivable                   -            46,236               -
               Conversion of Preferred Stock
                    to Common Stock                            -                 -       1,538,000
</TABLE>










                                       47
<PAGE>

                                V-ONE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

10.   NET LOSS PER SHARE

      The following  table sets forth the  computation  of basic and diluted net
      loss per share:

<TABLE>
<CAPTION>
                                                                     Year Ended December 31,
                                                       ----------------------------------------------------
                                                            2000           1999                 1998
                                                       ----------------------------------------------------
<S>                                                    <C>               <C>            <C>
Numerator:
Loss before extraordinary item                         $  (8,862,015)    $(9,307,892)    $    (9,193,396)
Less: Dividend on preferred stock                           (369,979)       (272,245)           (110,879)
Deemed dividend on preferred stock                                 -               -            (102,755)
                                                       -------------     ------------       ------------
Net loss before extraordinary item                        (9,231,994)     (9,580,137)         (9,407,030)
    Extraordinary item-early extinguishments of                    -        (372,052)                  -
    debt                                               -------------     ------------       ------------
    Net loss attributable to holders of Common         $  (9,231,994)    $(9,952,189)    $    (9,407,030)
    Stock
                                                       =============     ============       ============
Denominator:
Denominator for basic net loss per share-weighted
    average shares                                         20,871,076      16,938,205         13,898,450

Effect of dilutive securities:
    Preferred Stock                                                 -               -                  -
    Stock Options                                                   -               -                  -
    Warrants                                                        -               -                  -
                                                        -------------     -----------       ------------
Dilutive potential common shares                                    -               -                  -

Denominator for diluted net loss per share-adjusted
    weights average shares                                 20,871,076      16,938,205         13,898,450
                                                        =============     ===========       ============

Basic and diluted loss per share:

    Loss before extraordinary item                     $       (0.44)    $     (0.57)    $        (0.68)
Extraordinary item-early extinguishments of debt                    -          (0.02)                 -
                                                       -------------     ------------       ------------
Net Loss attributable to holders of Common Stock       $       (0.44)    $     (0.59)    $        (0.68)
                                                       =============     ============       ============
</TABLE>

The following  equity  instruments were not included in the diluted net loss per
share calculation because their effect would be anti-dilutive:

                                  Year ended December 31,

                           ------------------------------------
                               2000        1999        1998
                            -----------------------------------

               Preferred
               stock:
                  Series A           -           -           -
                  Series B    1,287,554   1,287,554          -
                  Series C       54,714     335,000          -
               Stock          2,851,212   2,515,833   2,557,378
               options
               Warrants       1,072,054   3,974,957   1,688,576





                                       48
<PAGE>

                                V-ONE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

11.   SUBSEQUENT EVENTS (UNAUDITED)

      As of  February  14,  2001,  V-ONE  issued  3,675,000  shares  of Series D
      Convertible Preferred Stock ("Series D Stock") and non-detachable warrants
      to purchase 735,000 shares of the Company's  Common Stock  ("Warrants") to
      certain   accredited   investors  for  an  aggregate   offering  price  of
      $7,019,250.  The securities were sold in units,  each unit containing five
      shares of Series D Stock and a  Warrant  to  purchase  one share of Common
      Stock  ("Unit")  for a price of $9.55  per  Unit  pursuant  to Rule 506 of
      Regulation D promulgated under the Securities Act of 1933, as amended. The
      Series D Stock is immediately convertible at an initial conversation price
      of $1.91 per share. The Warrants are immediately exercisable at an initial
      exercise  price of $2.29 per share and expire on February  14,  2004.  The
      Company received  $6,469,250 in net proceeds after payment of all fees and
      offering  expenses.  The net  proceeds  of the  offering  will be used for
      general working capital purposes.

      Effective March 13, 2001, the Company  completed a sale to NFR of the 6.8%
      minority  interest in its common stock. The sale price per share was $3.25
      and the proceeds of the sales of the 500,000 shares were $1,625,000.

      On February 20, 2001, a class action  lawsuit  alleging  violations of the
      federal securities laws, filed in the U.S. District Court of Maryland, was
      dismissed in its  entirety,  with  prejudice.  In granting  the  Company's
      motion to dismiss,  the United States District Court ruled that plaintiffs
      had failed to state a cause of action  for  violations  of the  securities
      laws and awarded costs to the defendants.
























                                       49
<PAGE>

                                V-ONE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

12.   SELECTED QUARTERLY FINANCIAL DATA - UNAUDITED

      The following table presents the quarterly  results for V-ONE  Corporation
      and its subsidiaries for the years ending December 31, 1999 and 2000:

<TABLE>
<CAPTION>
                                            1ST QUARTER         2ND QUARTER         3RD QUARTER        4TH QUARTER
                                            -----------         -----------         -----------        -----------
<S>                                       <C>                 <C>                 <C>                <C>

        2000
        Revenue                           $    1,383,921      $    1,075,846      $      645,485     $     1,448,378
        Gross profit                           1,300,926             924,388             500,866           1,263,591
        Net loss                          $   (1,482,222)     $  (2,511,701)      $  (2,701,358)     $    (2,166,734)
                                             ===========         ===========         ===========         ===========

        Net loss per share, basic and     $       (0.09)      $       (0.12)      $       (0.12)     $        (0.10)
        diluted                                  ======              ======              ======              ======

        1999

        Revenue                           $    1,696,472      $    1,006,668      $      932,894     $     1,329,646
        Gross profit                           1,514,083             776,279             787,515             776,656
        Net loss before extraordinary         (2,179,297)         (2,192,669)         (2,638,051)         (2,297,875)
           item
        Extraordinary item - early
        extinguishment of debt                         -                   -                   -            (372,052)
                                             ------------        -----------         -----------         -----------
        Net loss                          $   (2,179,297)     $   (2,192,669)     $   (2,638,051)    $    (2,669,927)
                                             ===========         ===========         ===========         ===========

        Basic and diluted net loss per
           share                          $       (0.13)      $       (0.13)      $       (0.16)     $        (0.13)
        before extraordinary item
        Extraordinary item - early
        extinguishment of debt                        -                   -                   -               (0.02)
                                             ------------        -----------         -----------         -----------
        Net loss per share, basic and     $       (0.13)      $       (0.13)      $       (0.16)     $        (0.15)
        diluted                                   ======              ======              ======              ======
</TABLE>






                                                              50
<PAGE>

<TABLE>
<CAPTION>
                                               V-ONE CORPORATION
                               SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS-

                             For the years ended December 31, 1998, 1999 and 2000


                                                          Additions
                                          Balance at      Charged to
                                         Beginning of     Costs and                          Balance at End
             Description                    Period         Expenses         Deductions         of Period
<S>                                  <C>                     <C>                 <C>          <C>

  ALLOWANCE FOR DOUBTFUL ACCOUNTS
     December 31, 1998               $           500,405          24,233              ---     $      524,638
     December 31, 1999               $           524,638        (220,912)         169,482     $      134,244
     December 31, 2000               $           134,244          68,490           97,070     $      105,664

  DEFERRED TAX ASSET
  VALUATION ALLOWANCE
     December 31, 1998               $         7,431,743       2,017,021              ---     $    9,448,764
     December 31, 1999               $         9,448,764       5,410,464              ---     $   14,859,228
     December 31, 2000               $        14,859,228       1,620,108              ---     $   16,479,336

  ALLOWANCE FOR
  NON-SALABLE INVENTORY
     December 31, 1998               $           212,700         100,656              ---     $      313,356
     December 31, 1999               $           313,356             ---          225,662     $       87,694
     December 31, 2000               $            87,694          32,699           41,737     $       78,656
</TABLE>
























                                                      51
<PAGE>

ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

         None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The  information   required  by  this  Item  concerning  directors  and
         executive officers is incorporated herein by reference to the Company's
         definitive proxy statement for its annual  stockholders'  meeting to be
         held on May 10, 2001.

ITEM 11. EXECUTIVE COMPENSATION

         The information required by this Item concerning executive compensation
         is incorporated  herein by reference to the Company's  definitive proxy
         statement  for its annual  stockholders'  meeting to be held on May 10,
         2001.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information  required by this Item concerning security ownership of
         certain  beneficial  owners and  management is  incorporated  herein by
         reference to the Company's  definitive  proxy  statement for its annual
         stockholders' meeting to be held on May 10, 2001.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this Item concerning certain  relationships
         and related  transactions  is  incorporated  herein by reference to the
         Company's  definitive  proxy  statement  for its  annual  stockholders'
         meeting to be held on May 10, 2001.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K

         None.




                                       52
<PAGE>

      (a)(1)  Financial Statement Schedule.

              See  index  to  Financial  Statements  on  page  30  All  required
              financial  statement  schedules of the Company are set forth under
              Item 8 of this Annual Report on Form 10-K.

      (a)(2)  Exhibits

NUMBER      DESCRIPTION
------      -----------

3.1         Amended and Restated  Certificate  of  Incorporation  as of July 2,
            1996 (1)
3.2         Amended and Restated Bylaws dated as of February 2, 1998 (4)
3.3         Certificate   of   Amendment   to   Certificate   of   Designation,
            Preferences,  and Rights of Series A  Convertible  Preferred  Stock
            dated September 9, 1996 (1)
3.4         Certificate  of   Elimination   of   Certificate  of   Designation,
            Preferences and Rights of Series A Convertible Preferred Stock (2)
3.5         Certificate  of  Designations  of  Series A  Convertible  Preferred
            Stock (2)
3.6         Certificate  of   Elimination   of   Certificate  of   Designation,
            Preferences  and Rights of Series A  Convertible  Preferred  Stock,
            dated March 4, 1999(9)
3.7         Certificate  of  Designations  of  Series B  Convertible  Preferred
            Stock, dated June 11, 1999 (10)
3.8         Certificate  of  Designations  of Series C Preferred  Stock,  dated
            September 9, 1999 (11)
3.9         Certificate  of  Designations  of  Series D  Convertible  Preferred
            Stock, dated February 14, 2001(14)
9.1         Voting  Trust  Agreement  between  Hai Hua Cheng and James F. Chen,
            Trustee (1)
9.2         Voting Trust  Agreement  between  Robert  Zupnik and James F. Chen,
            Trustee (1)
9.3         Voting Trust  Agreement  between  Dennis  Winson and James F. Chen,
            Trustee (1)
10.1        Employment Agreement between V-ONE Corporation  ("V-ONE") and James
            F. Chen dated as of June 12, 1996 (1)
10.2        V-ONE 1995 Non-Statutory Stock Option Plan (1)
10.3        V-ONE 1996 Non-Statutory Stock Option Plan (1)
10.4        V-ONE 1996 Incentive Stock Plan (1)
10.5        Software License  Agreement  between Trusted  Information  Systems,
            Inc. ("TIS") and V-ONE executed October 6, 1994 (1)
10.6        First Amendment to the Software License  Agreement  between TIS and
            V-ONE (1)
10.7        Second Amendment to the Software License  Agreement between TIS and
            V-ONE (1)
10.8        Third Amendment to the Software License  Agreement  between TIS and
            V-ONE (1)
10.9        Fourth Amendment to the Software License  Agreement between TIS and
            V-ONE (1)
10.10       OEM  Master  License  Agreement  between  RSA Data  Security,  Inc.
            ("RSA") and V-ONE dated December 30, 1994 and Amendment  Number One
            to the OEM Master License Agreement between RSA and V-ONE (1)
10.11       Amendment  Number Two to the OEM Master License  Agreement  between
            RSA and V-ONE and Conversion Agreement dated May 23, 1996 (1)
10.12       Promissory  Note for Hai Hua Cheng with Allonge and Amendment dated
            June 12, 1996 (1)
10.13       Form of Exchange and Purchase Agreement dated April 1996 (1)
10.14       Registration  Rights  Agreement  Between  V-ONE and JMI Equity Fund
            II, L.P. ("JMI") (1)
10.15       8% Senior  Subordinated  Note due June 18,  2000 Issued by V-ONE to
            JMI (1)
10.16       Warrant to Purchase  100,000 shares of Common Stock Issued by V-ONE
            to JMI (1)
10.17       Warrant to Purchase  400,000 shares of Common Stock Issued by V-ONE
            to JMI (1)
10.18       Employment  Agreement  between V-ONE and Jieh-Shan Wang dated as of
            July 8, 1996 (1)
10.19       Subscription  Agreement  dated as of December 3, 1997 between V-ONE
            and Advantage Fund II Ltd. (2)


                                       53
<PAGE>

NUMBER      DESCRIPTION
------      -----------

10.20       Registration  Rights Agreement dated as of December 3, 1997 between
            V-ONE and Advantage Fund II Ltd. (2)
10.21       Commitment   Letter  dated  December  8,  1997  between  V-ONE  and
            Advantage Fund II Ltd. (2)
10.22       Registration  Rights Agreement dated as of December 8, 1997 between
            V-ONE and Wharton Capital Partners, Ltd. (2)
10.23       Warrant  to  Purchase  60,000  shares  of  Common  Stock  Issued on
            December 8, 1997 by V-ONE to Wharton Capital Partners, Ltd. (2)
10.24       Letter Agreement between V-ONE and Wharton Capital  Partners,  Ltd.
            dated October 22, 1997 (2)
10.25       V-ONE 1998 Incentive Stock Plan (4)
10.26       Warrants  dated  November  21, 1997 to Purchase  300,000  shares of
            Common Stock granted to David D. Dawson (4)
10.27       Employment  Agreement  dated  November 21, 1997  between  V-ONE and
            David D. Dawson (4)
10.28       Amendment to Employment  Agreement  dated  November 7, 1997 between
            V-ONE and Charles B. Griffis (4)
10.29       Amendment to Section 2.08 of 1996 Incentive Stock Plan (4)
10.30       Lease Agreement dated March 24, 1997 between Bellemead  Development
            Corporation and V-ONE (3)
10.31       Inconvertibility Notice dated September 21, 1998 (5)
10.32       Waiver  Agreement,  dated as of  September  22,  1998,  between the
            Company and Advantage Fund II Ltd. (5)
10.33       Amendment No. 1 dated as of September 22, 1998 to the  Registration
            Rights Agreement between the Company and Advantage Fund II Ltd. (5)
10.34       Warrant  to  purchase  100,000  shares  of Common  Stock  issued on
            September 22, 1998 by V-ONE to Advantage Fund II Ltd. (5)
10.35       Warrant  to  purchase  389,441  shares  of Common  Stock  issued on
            September 22, 1998 by V-ONE to Advantage Fund II Ltd. (5)
10.36       Waiver  Letter,  dated  November  5, 1998  between  the Company and
            Advantage Fund II Ltd. (6)
10.37       Placement  Agent  Agreement,  dated  October 9, 1998,  between  the
            Company and LaSalle St. Securities, Inc. (6)
10.38       Amendment No. 1 to Placement  Agent  Agreement,  dated  November 9,
            1998, between the Company and LaSalle St. Securities, Inc. (6)
10.39       Escrow  Agreement,  dated  October  9,  1998,  among  the  Company,
            LaSalle St. Securities, Inc. and LaSalle National Bank (6)
10.40       Amendment No. 1 to Escrow Agreement,  dated November 9, 1998, among
            the Company,  LaSalle St.  Securities,  Inc.  and LaSalle  National
            Bank (6)
10.41       Form of Subscription Documents (6)
10.42       Form of Addendum #1 to Subscription Documents (6)
10.43       Form of Addendum #2 to Subscription Documents (6)
10.44       Form of Warrant  granted to A.L.  Giannopoulos  to purchase  10,000
            shares of the Company's Common Stock  (6)
10.45       Form of  Warrant  granted to  William  E. Odom to  purchase  10,000
            shares of the Company's Common Stock  (6)
10.46       Amendment No. 1 to Placement  Agent  Agreement,  dated November 16,
            1998, between the Company and LaSalle St. Securities, Inc. (7)
10.47       Waiver  Letter  dated  November  18,  1998  between the Company and
            LaSalle St. Securities, Inc. (7)
10.48       Form of Second Version of Subscription Documents (7)
10.49       Form of Addendum #1 to Second Version of Subscription Documents (7)
10.50       Form of Addendum #2 to Second Version of Subscription Documents (7)
10.51       Warrant  dated  November  20,  1998 to  purchase  50,000  shares of
            Common Stock issued to LaSalle St. Securities, Inc. (7)


                                       54
<PAGE>

NUMBER      DESCRIPTION
------      -----------

10.52       Employment  Agreement  dated  November  6, 1998  between  V-ONE and
            Charles B. Griffis (9)
10.53       Employment  Agreement dated August 1, 1998 between V-ONE and Robert
            F. Kelly (9)
10.54       Loan and Security  Agreement  dated February 24, 1999 between V-ONE
            and Transamerica Business Credit Corporation ("Transamerica") (8)
10.55       Patent and Trademark  Security  Agreement  dated  February 24, 1999
            between V-ONE and Transamerica (8)
10.56       Security  Agreement in  Copyrighted  Works dated as of February 24,
            1999 between V-ONE and Transamerica (8)
10.57       Amendment  to  Employment  Agreement  dated as of August 1, 1998 by
            and between the Company and Jieh-Shan Wang (9)
10.58       Amendment to  Employment  Agreement  dated as of January 1, 1999 by
            and between the Company and James F. Chen (9)
10.59       Subscription  Agreement for Series B Convertible  Preferred  Stock,
            dated June 11, 1999 (10)
10.60       Registration Rights Agreement, dated June 11, 1999 (10)
10.61       Non-Negotiable Promissory Note, dated June 11, 1999 (10)
10.62       Form of Series C Preferred Stock Purchase Agreement (11)
10.63       Employment  Agreement dated July 1, 1999 by and between the Company
            and Margaret E. Grayson (12)
10.64       Employment  Agreement dated July 1, 1999 by and between the Company
            and David D. Dawson (13)
10.65       Series D Convertible  Preferred  Stock and  Non-Detachable  Warrant
            Purchase Agreement dated February 14, 2001
10.66       Form  of  Warrant  Granted  to  Holders  of  Series  D  Convertible
            Preferred Stock, dated February 14, 2001
10.67       2001 Employee Stock Purchase Plan
10.68       Form of  Subscription  Agreement  between the Company and Employees
            under the 2001 Employee Stock Purchase Plan
10.69       Agreement  for Purchase  and Sale of Stock  between the Company and
            NFR Security, Inc., dated March 13, 2001
23.1        Consent of Ernst & Young LLP
23.2        Consent of PricewaterhouseCoopers LLP

------------------------------

(1) The information required by this exhibit is incorporated herein by reference
to V-ONE's Registration Statement on Form S-1 (No. 333-06535).

(2) The information required by this exhibit is incorporated herein by reference
to V-ONE's Form 8-K dated December 8, 1997.

(3) The information required by this exhibit is incorporated herein by reference
to V-ONE's Form 10-Q for the three months ended June 30, 1997.

(4) The information required by this exhibit is incorporated herein by reference
to V-ONE's Form 10-K for the twelve months ended December 31, 1997.

(5) The information required by this exhibit is incorporated herein by reference
to V-ONE's Form 8-K dated September 22, 1998.

(6) The information required by this exhibit is incorporated herein by reference
to V-ONE's Form 10-Q for the nine months ended September 30, 1998.



                                       55
<PAGE>

(7) The information required by this exhibit is incorporated herein by reference
to V-ONE's Form 8-K dated November 20, 1998.

(8) The information required by this exhibit is incorporated herein by reference
to V-ONE's Form 8-K dated March 11, 1999.

(9) The information required by this exhibit is incorporated herein by reference
to V-ONE's Form 10-K for the twelve months ended December 31, 1998.

(10)  The  information  required  by this  exhibit  is  incorporated  herein  by
reference to V-ONE's Form 8-K dated June 23, 1999.

(11)  The  information  required  by this  exhibit  is  incorporated  herein  by
reference to V-ONE's Form 8-K dated September 15, 1999.

(12)  The  information  required  by this  exhibit  is  incorporated  herein  by
reference to V-ONE's Form 10-Q for the three months ended June 30, 1999.

(13)  The  information  required  by this  exhibit  is  incorporated  herein  by
reference to V-ONE's Form 10-K for the twelve months ended December 31,1999.

(14) The  information  required by this exhibit is  incorporated by reference to
V-ONE's Form 8-K, dated March 1, 2001.

(b)    Reports on Form 8-K

              None.












                                       56
<PAGE>

                                     SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) 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

 Date: March 30, 2001
                                       By: /s/ Margaret E. Grayson
                                           --------------------------------
                                           Margaret E. Grayson
                                           President and Chief Executive Officer

Pursuant to the requirements of Securities Exchange Act of 1934, this report has
been signed below by the following  persons on behalf of the  registrant  and in
the capacities indicated.

     SIGNATURE                          TITLE                         DATE

/s/ Margaret E. Grayson               President,                  March 30, 2001
-------------------------          Chief Executive
Margaret E. Grayson              Officer and Director


/s/ John F. Nesline                    Chief                      March 30, 2001
-------------------------         Financial Officer
John F. Nesline                     and Treasurer
                                     Controller

/s/ James F. McManus                  Director                    March 30, 2001
-----------------------
James F.  McManus
                                      Director                    March 30, 2001

------------------------
Michael O'Dell

/s/ Heidi B. Heiden                   Director                    March 30, 2001
-----------------------
Heidi B. Heiden

/s/ Michael J. Mufson                 Director                    March 30, 2001
-------------------------
Michael Mufson

/s/ William E. Odom                   Director                    March 30, 2001
-------------------------
William E. Odom














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