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, 2001

              [ ] 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,  as of  March  1,  2002  was  approximately  $26,189,000.  This
         calculation   does  not  reflect  a  determination   that  persons  are
         affiliates for any other purposes.

         Registrant  had  24,248,904,  shares of Common Stock  outstanding as of
         March 1, 2002.


<PAGE>


DOCUMENTS INCORPORATED BY REFERENCE

Portions  of  the  registrant's  definitive  proxy  statement  to be  issued  in
conjunction with  registrant's 2002 annual  stockholder's  meeting to be held on
May 16, 2002 are  incorporated by reference in Part III of this Annual Report on
Form 10-K.

FORWARD-LOOKING STATEMENTS

In  addition  to   historical   information,   this   Annual   Report   contains
forward-looking  statements  that  involve  risks  and  uncertainties  that  are
generally noted by terms such as "believe", "expectations",  "foresee", "goals",
"potential" and "prospects".  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 at a later date.

                                     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 enable  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.


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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
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


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     identification  which provided a higher level of authentication in that two
     independent  components  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.  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.

The  events  of  September  11,  2001  have  accelerated  the rate at which  the
Department  of Defense,  civilian  agencies,  and  federal,  state and local law
enforcement  are  adopting  security  solutions.  As a result  of the  terrorist
attacks,  many  of the  U.S.  law  enforcement  and  intelligence  agencies  are


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<PAGE>

collaborating   to   investigate   and  prosecute   terrorist   activities   and
conspiracies. This joint effort requires sharing information on an unprecedented
scale  using,  among  other  services,  the  Department  of  Justice's  Regional
Information  Sharing  Systems  (RISS)  Program,  which  is  secured  by  V-ONE's
technology.  The RISS Secure  Intranet is a nationwide law  enforcement  network
that allows secure communications among more than 5,700 federal, state and local
law enforcement agencies.

Recognizing  the need for  collaboration  and  information  sharing  in a secure
environment,  the USA Patriot Act (USAPA), enacted on October 26, 2001, provides
additional funding and support to expand the RISS Program.  Sharing  information
among law  enforcement  agencies  using  RISS and other  networks  is a security
challenge that requires strongly  encrypted  communications  and powerful access
controls.  Securing these expanding network creates additional opportunities for
VPN providers.

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,  data
integrity,   non-repudiation,   authorization  and  encryption;  and  SmartGuard
appliances.  V-ONE's  SmartGuard VPN  appliances  are built on high-speed  Intel
processors.   SmartGuard  incorporates  SmartGate  security  technology  into  a
"drop-in"  suite of devices  that are easy to install,  deploy and  manage.  The
SmartGuard appliances use V-ONE's award-winning  SmartGate VPN software solution
with a powerful user authentication  system,  access control database and strong
encryption  capabilities.  A robust stateful  inspection  firewall is integrated
with all SmartGuard  appliances.  SmartGuard's advanced VPN capabilities include
IPSec  tunneling and application  layer security that allows firewall  traversal
without requiring end users to make network  configuration  changes. 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.


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<PAGE>


STRATEGY

V-ONE's objective is to capitalize on its application level technology to become
the  security  solution of choice for large  enterprises,  including  government
agencies  and  public  sector  organizations,  financial  institutions,  service
providers,  and commercial enterprises  worldwide.  V-ONE's products now include
both application  level technology and IPSec,  enabling  organizations to employ
the most  cost-effective  and efficient  security solution without  compromising
data integrity and ensuring that communications  will be completed  successfully
and securely.

Key elements of V-ONE's strategy are:

INCREASING  MARKET  SHARE  IN  THE  GOVERNMENT  SECTOR.  V-ONE  will  serve  its
established  base of  government  customers  through  existing  and new  channel
partners.  V-ONE  has  successfully  secured  confidential  information  for the
government since shipping its first products in 1995. V-ONE technologies use all
approved government encryption methods,  including the government's "triple DES"
Data  Encryption  Standard,  and meet the standards of the U.S.  Government  for
broad scale  deployments.  The triple DES standard is the  strongest  encryption
method  employed  by the U.S.  government,  and is  applied to verify the user's
identity and to protect the flow of data itself. In addition,  in December 2001,
the National  Institute of Standards and Technology (NIST) approved the Advanced
Encryption Standard (AES) and is developing implementation protocols.  V-ONE has
added  AES to its  library  of  encryption  methods  and will  incorporate  this
algorithm as the approved  encryption method upon release of the final protocols
from NIST.  Government  clients  currently  using  V-ONE's  technology to secure
information  include the U.S.  Department  of the  Treasury,  the  Department of
Defense,  a  significant  number of  federal,  state  and local law  enforcement
agencies who share data through the Regional  Information Sharing Systems (RISS)
and  Law  Enforcement   Online  (LEO),  two  out  of  the  three  National  Drug
Intelligence  Centers,  more than 30 regional  Drug  Traffic  Centers,  12 state
governments  and several other regional and local law  enforcement  initiatives.
V-ONE's  product  capabilities  are  well  suited  for the  government's  secure
information sharing demands.

ENHANCING PRODUCT TECHNOLOGY TO ADDRESS CUSTOMER NEEDS. V-ONE intends to enhance
its   technology   through   continued   internal   development   and  strategic
partnerships. V-ONE believes its current technology, consisting of the SmartGate
client/server  software  featuring its patented OLR  capability,  the SmartGuard
family of VPN appliances featuring the new Command Center management system, and
an  IPSec  client  released  in  January  2002,   delivers  superior   security,
performance  and cost  savings  when  compared  to any other  security  products
available  in the market.  V-ONE will focus its  development  efforts to deliver
specific functionality including a wider and more feature-rich set of management
tools, additional high availability performance  capabilities,  and enhancements
for the emerging mobile enterprise/wireless access segment.

CAPITALIZING ON CHANNEL  PARTNERS'  MARKET PRESENCE TO INCREASE MARKET AWARENESS
OF V-ONE.  V-ONE intends to use its OEM, Service Provider and Systems Integrator
partners'  strong  brand  recognition  and  marketing  resources to increase the
market's awareness of V-ONE's security products.  This approach will allow V-ONE
to effectively  lower its sales and marketing  costs,  preserving  resources for
continuing  product  development.  Although  the Company  will reduce its direct
marketing  efforts,  V-ONE  will  continue  in its role as an active  government
advisor.

PRODUCTS

V-ONE's  hardware  and  software  security  products  deliver  to users  all the
essential features of a secure network:  authentication,  integrity, privacy and
non-repudiation.  V-ONE's  technology  has met the tough  standards  of the U.S.
Government  for  broad  scale  deployments  and  is  FIPS  (Federal  Information
Processing  Standards)  validated,  making it viable for the most  demanding  of


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government or commercial  environments.  The Company's  product portfolio offers
solutions for remote access, site-to-site, and extranet applications.

The  cornerstone of V-ONE's  network and  application  security  solution is its
patented SmartGate client/server technology.

SMARTGATE ENTERPRISE SOLUTION
V-ONE's powerful  SmartGate  server software,  available on Windows NT, Solaris,
BSD,  and Red Hat  Linux,  allows a company  to  rapidly  deploy a VPN  solution
scalable to hundreds of thousands of concurrent  users. It enables secure access
to TCP/IP  based  applications  and other  resources  through  the  Internet  by
providing a framework for mutual authentication,  strong data encryption, access
control, audit logging and on-line registration.  SmartGate works with all major
firewalls  and  supports  a wide  range of third  party  authentication  systems
including  x.509  (PKI),  LDAP,  RSA  SecurID,   RADIUS,  Entrust,  and  digital
certificates  from  multiple   providers.   Since  SmartGate   operates  at  the
application  layer,  it can be deployed into complex  environments  and overcome
Network Address  Translation issues and other obstacles commonly  encountered in
VPN implementations.

A patented On-Line Registration (OLR) system enables VPN deployment to end users
in a  matter  of  minutes.  User  IDs  can be  automatically  generated  without
administrative interaction.

SMARTPASS
V-ONE's  SmartPass  client  product runs as a  non-intrusive  application on the
desktop  or mobile  device,  or as a Java  applet on a browser,  to provide  VPN
connection services to the SmartGate server. The client is extremely well suited
for user devices with minimal consumption of system resources such as memory and
storage space.  Installation is fast, simple and designed to take the complexity
of VPN implementation out of the hands of end users. To securely connect, an end
user  simply  enters  an  access  code  that  verifies  ownership  of his or her
authentication token that can reside on a hard drive, floppy disk or smart card.
Advanced security related functions are performed  automatically and hidden from
the end  user.  SmartPass  is  available  on a very  broad  range  of  computing
platforms including Windows  95/98/NT/2000/XP/CE/Pocket  PC, Solaris, HP-UX, BSD
UNIX, Red Hat Linux, Mac and Palm OS.

SMARTADMIN
Management  of a V-ONE  VPN is  handled  by means  of  SmartAdmin,  a  powerful,
flexible tool that enables  administration  of one or more SmartGate servers and
allows full control of user access to specific resources.  The controls are both
easy to implement and precise. Access permissions can be as broad or as granular
as required,  ranging from company-wide visibility down to an individual who can
access  only  a  single  file,  application,  service  or  URL.  Access  control
permissions  can  be  created  for  groups  and  support  a  powerful  hierarchy
capability   (nested   group)   where   groups   inherit   access   permissions.
Administration  can be  centralized  or  distributed,  and performed  locally or
through a secure remote connection.

SMARTGUARD APPLIANCES
V-ONE's  SmartGuard  VPN appliances  are built on high-speed  Intel  processors.
SmartGuard  incorporates  proven SmartGate security  technology into a "drop-in"
suite of devices that are easy to install, deploy, and manage:

o    SmartGuard 1000: a tabletop unit designed for branches and remote offices.
o    SmartGuard 4000: a 1U rack mountable enterprise class device.
o    SmartGuard  5000: a 2U high  reliability  enterprise  system with redundant
     components and a high availability  option for the most demanding  security
     environments.

The  SmartGuard  appliances  use V-ONE's  award-winning  SmartGate  VPN software
solution with a powerful user authentication system, access control database and
strong  encryption  capabilities.  A  robust  stateful  inspection  firewall  is
integrated with all SmartGuard appliances.

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SmartGuard's  advanced VPN capabilities  include IPSec tunneling and application
layer security that allow firewall traversal without requiring end users to make
network  configuration  changes.  This  innovative  combination  of network  and
application level security allows site-to-site protection as well as the ability
to extend  security to mobile users and business  partners who require  extranet
access.  SmartGuard  solutions are manageable  from a single PC, directly or via
remote access.

The optional web accessible  SmartGuard  Command Center allows remote management
of a fully  meshed  network for  large-scale  enterprise  class  solutions.  The
ability to easily  monitor,  manage and control  thousands of tunnels in a large
VPN network from a simple graphical interface is targeted for complex enterprise
and service provider implementations.

CUSTOMER SERVICE AND SUPPORT

V-ONE provides Tier 1 customer  support  service to direct  customers and Tier 2
support service to its channel  partners.  V-ONE's  Customer Care group provides
standard   response   services   and  optional   enhanced   services  for  large
implementations, including Extended Support and Rapid Response Support. Standard
service  provides live telephone and on-line  support between 8:00 A.M. and 8:00
P.M.  Eastern  Standard Time during V-ONE's  normal  business days. In addition,
V-ONE  provides a toll-free  call-back  system for  customers  who need  service
during non-standard  hours.  On-call support engineers provide telephone support
during non-standard hours. Extended Support provides 24x7 coverage with standard
response times. Rapid Response is 24x7 with shorter response windows.

V-ONE's expert sales  engineering  group also provides critical customer support
throughout  the  pre-sales  and  implementation  process,  and is available  for
assistance in support situations and enhancement engagements.

PRODUCT DEVELOPMENT

V-ONE  has  assembled  a team of  engineers  with  experience  in the  fields of
software  development,  network systems  design,  security  standards,  Internet
protocols and network  management  software.  V-ONE's  experience in developing,
implementing  and  supporting  software  solutions  for complex  enterprise  and
extranet  environments is a significant  factor  differentiating  V-ONE from its
competition.  In  addition  to having  the  ability to build  complex  software,
V-ONE's  engineering  team has the skills  and  experience  to  deliver  turnkey
appliance solutions.

V-ONE believes that strong product development capabilities are essential to its
strategy  of  enhancing  its  core  technology,   developing  and  incorporating
additional   functions  and  maintaining  the  competitiveness  of  its  product
offerings.  V-ONE's research and development process is driven by market demand,
availability of new technology, evolution of Internet and security standards and
customer feedback. V-ONE's technology is its primary strength and it is critical
that V-ONE's products continue to evolve to meet the needs of the market.  V-ONE
continues  to  develop  new  releases  of  SmartGate,   its   enterprise   class
client/server software, and the SmartGuard appliance product line, including the
Command Center management tool.

V-ONE also provides  secure  wireless  communication  solutions with its current
technology.  The Company  intends to continue to develop this capability to meet
the   anticipated   demand  for  wireless   LAN  security  and  the   increasing
implementation of mobile devices in the enterprise and government sectors.

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


                                       8
<PAGE>

marketing  strategy.  To date,  the Company  has had  success in the  government
sector and plans to focus sales and marketing  efforts on existing and potential
customers in the federal, state and local government sectors.

COMPETITION

The  market for  network  security  products  is highly  competitive,  and V-ONE
expects  competition to intensify in the future.  V-ONE competes  principally on
the basis of  product  security,  breadth  of remote  client  support,  speed of
implementation, scalability and cost-effectiveness. The Company believes that it
competes favorably on the basis of these factors.

V-ONE   participates  in  the  VPN  appliance  and  software  market   segments.
Competitors in these markets include:

o    site-to-site   IPSec  security   appliance  and  network  security  systems
     suppliers  such  as  SonicWall,  Inc.,  WatchGuard  Technologies  Inc.  and
     NetScreen Technologies, Inc.;
o    firewall and VPN software vendors such as Check Point Software Technologies
     Ltd.;
o    network  equipment   manufacturers  such  as  Cisco  Systems,  Inc.,  Nokia
     Corporation and Nortel Networks Corporation;
o    remote client vendors such as SafeNet, Inc. and Certicom Corporation;
o    suppliers  that  provide  secure  extranet   solutions  such  as  KyberPass
     Corporation, Aventail Corporation and Symantec Corporation; and
o    VPN management vendors such as SmartPipes, Inc.

The Company  believes it maintains a distinct  competitive  advantage over other
providers  by  securing  networks at the  application  level with  powerful  yet
precise user access  controls.  This  functionality  enables  V-ONE to serve the
complex  requirements of the large  enterprise  market where secure  information
sharing across organizational boundaries and partner extranet communications are
required.

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 SmartGate server products,
SmartGuard  Appliance  products and turnkey SmartWall 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 ability to meet delivery schedules.

                                       9
<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.

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  ability to
develop and deliver its products.  If 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's  success and ability to compete are  substantially  dependent upon
internally developed technology and expertise.  V-ONE has received eight patents
which expire over a period  between 2014 and 2017.  The patents  cover  critical
aspects of V-ONE  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" 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 take 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 applications. There
can be no  assurance  that any such  protection  will be granted or, if granted,
that it will adequately protect the covered technology.

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


                                       10
<PAGE>

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  ability to
develop new  technologies  and deliver  products in its current suite of network
security products.

EMPLOYEES

As of March 1, 2002,  the Company had 69 full-time  employees and 7 consultants.
Of these  individuals,  29 were in sales and marketing,  32 were in research and
product development,  and 15 in administration.  None of the Company's employees
is  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  addresses
risks V-ONE believes to be material to its business and operations.  This Annual
Report on Form 10-K  contains  "forward-looking"  statements  that are generally
noted  by  terms  such  as  "believes",   "expectations",   "foresee",  "goals",
"potential",  and "prospects."  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
filed by V-ONE with the Securities and Exchange  Commission  ("SEC"),  which may
identify important risk factors for V-ONE.



                                       11
<PAGE>

V-ONE'S ACCUMULATED DEFICIT COULD AFFECT OVERALL OPERATIONS.  As of December 31,
2001,  V-ONE had an  accumulated  deficit of  approximately  $58,787,000.  V-ONE
currently expects to incur additional net losses over the next several quarters.
V-ONE may not achieve or sustain  profitability  or significant  revenues in the
short run. To address these risks, V-ONE must, among other things,  continue its
emphasis on research and  development,  successfully  execute and  implement its
marketing strategy,  respond to competitive developments and seek to attract and
retain talented  personnel.  V-ONE may be unable to  successfully  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.

V-ONE was founded in February 1993 and  introduced its first product in December
1994.  Accordingly,  V-ONE did not generate any significant  revenues until 1995
when it commenced  sales of its SmartWall  firewall  product and  introduced its
SmartGate  client/server  system.  Revenues for the years 1997, 1998, 1999, 2000
and 2001 were approximately $5,973,000,  $6,260,000,  $4,966,000, $4,554,000 and
$4,990,000, respectively.

Losses  attributable to holders of Common Stock for the years 1997,  1998, 1999,
2000 and 2001 were approximately $10,828,000, $9,407,000, $9,952,000, $9,232,000
and $9,911,000, respectively.

V-ONE's  results  of  operations  in  recent  periods  may  not  be an  accurate
indication of future  results of  operations in light of the evolving  nature of
the network  security  market and the uncertainty of the demand for Internet and
intranet products in general and V-ONE's products in particular.

OPERATING  LEVELS  WILL BE  AFFECTED  BY V-ONE'S  NEED FOR  ADDITIONAL  CAPITAL.
V-ONE's  cash used in operating  activities  was  approximately  $7.8 million in
fiscal  2001,  an  average  "burn  rate"  of  approximately  $648,000  a  month.
Notwithstanding acceptance of V-ONE's security concepts and critical acclaim for
its  products,  there  can be no  assurance  that the  consummation  of sales of
V-ONE's  products to existing  customers or proposed  agreements  with potential
customers will generate timely or sufficient revenue for V-ONE to cover its cost
of  operations  and meet its cash flow  requirements.  The  Company  has  sought
additional capital investments, thus far without success. Accordingly, V-ONE may
not have the funds needed to sustain  operations  during  2002,  and its audited
financial statements are presented subject to a "going concern" opinion. Nor may
the Company be able to continue to satisfy the Nasdaq  Small Cap Market  listing
requirements.  In addition  to  continuing  to pursue  capital  investment,  the
Company engaged Updata Capital to explore other alternatives to preserve V-ONE's
operations  and  maximize  shareholder  value,   including  potential  strategic
partnering  relationships,  a business  combination with a strategically  placed
partner, or a sale of V-ONE.

To preserve cash resources,  the Company will reduce  operating levels effective
on April 1, 2002.  For the immediate  future,  V-ONE will focus  exclusively  on
existing and potential customers in the government sector,  curtailing sales and
marketing operations to commercial  accounts,  reduce general and administrative
expenditures and all possible capital expenditures,  and effect staff reductions
approximating  25% of its  employees.  V-ONE may not be  successful  in  further
reducing operating levels or, even at reduced operating levels, V-ONE may not be
able to maintain  operations for any extended period of time without  additional
capital or a significant strategic transformative event.

RISKS  ASSOCIATED WITH THE EMERGING NETWORK SECURITY MARKET MAKE IT DIFFICULT TO
PREDICT DEMAND. 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,


                                       12
<PAGE>

developments  in the hardware and software  environments in which these products
operate, general economic conditions or other factors beyond V-ONE's control.

SALES TO  GOVERNMENT  AGENCIES  CONSTITUTE A  SIGNIFICANT  PERCENTAGE OF V-ONE'S
REVENUE AND ARE SUBJECT TO VARIOUS  POLICIES  AND LENGTHY  TESTING  PERIODS.  No
government  agency or department  has an  obligation  to purchase  products from
V-ONE in the future.  Government  contracts may 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. In addition, product implementation in
government  sales may be subject to  extended  periods  of  rigorous  validation
testing and a lengthy approval process by government agencies and bureaus within
an agency.  Such testing and approval may delay contract  awards and payments to
V-ONE  under such  contracts.  V-ONE  estimates  that for the fiscal  year ended
December 31, 2001, sales to the U.S. government constituted approximately 43% of
its revenue.

CONTINUED MARKET ACCEPTANCE OF SMARTGATE AND SMARTWALL IS NOT GUARANTEED.  V-ONE
currently  generates  most of its  revenues  from its  SmartGate  and  SmartWall
products.  SmartGate  and SmartWall  have met with a favorable  degree of market
acceptance  since sales of SmartWall  commenced in 1995. The percentage of total
revenue for SmartGate and SmartWall,  respectively, was 45.7% to 23.4% for 1999,
56.3% to 17.4%  for 2000 and  50.0% to 23.6% for  2001.  However,  SmartGate  or
SmartWall may not continue to be accepted in the future. In addition, any or all
of V-ONE's other current or future products could fail to win market acceptance.

RISKS OF  COMPETITION  COULD AFFECT  V-ONE'S  MARKET SHARE.  V-ONE faces intense
competition  in all of its market  segments.  The market  for  network  security
products is very  competitive and V-ONE expects  competition to intensify in the
future.  There  can  be no  assurance  that  V-ONE's  products  will  command  a
significant  share of the network security market.  Many of V-ONE's  competitors
have significantly  greater resources,  generate higher revenue and have greater
name recognition than V-ONE. There can be no assurance that V-ONE's  competitors
will not develop products that are superior to those developed by V-ONE or adapt
more  quickly  than  V-ONE to new  technologies  or  evolving  industry  trends.
Increased  competition may result in price reductions,  reduced gross margins or
loss of market  share,  any of which  could  have a material  adverse  effect on
V-ONE's revenue stream. There is no assurance that V-ONE will be able to compete
effectively against current or future competitors.

RISK OF ERRORS, FAILURES AND PRODUCT LIABILITY COULD AFFECT MARKET ACCEPTANCE OF
V-ONE'S  PRODUCTS.  The complex nature of V-ONE's software products can make the
detection  of errors or failures  difficult  when  products are  introduced.  If
errors or failures are subsequently discovered,  this may result in delays, lost
revenues,  lost  customers  during  the  correction  process,  damage to V-ONE's
reputation  and claims  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 it 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  COULD  AFFECT  DEMAND FOR V-ONE'S
PRODUCTS.  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


                                       13
<PAGE>

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  result in a decrease  in the demand for V-ONE's  products  and of V-ONE's
market share.

RISK OF DEFECTS AND  DEVELOPMENT  DELAYS  COULD AFFECT  V-ONE'S  ABILITY TO MEET
DELIVERY  SCHEDULES.   V-ONE  may  experience  delays  in  software  development
triggered  by factors such as  insufficient  staffing or the  unavailability  of
development-related software, hardware or technologies. Further, when developing
new software  products,  V-ONE's schedules may be altered as a result of changes
to the product  specifications  in response  to  customer  requirements,  market
developments,  performance problems or V-ONE-initiated  changes. 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.

RISKS ASSOCIATED WITH LONG SALES CYCLE MAKE IT DIFFICULT TO PREDICT RESULTS. 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.  As a result,  product  revenues in any
period will be  substantially  dependent on orders booked and registered in that
period.

MARKET  VOLATILITY COULD AFFECT V-ONE'S STOCK PRICE. The market price of V-ONE's
Common  Stock  could be subject  to  significant  fluctuations  in  response  to
variations  in  quarterly   operating   results  and  other  factors,   such  as
announcements  of new  products  by  V-ONE or its  competitors  and  changes  in
financial estimates by securities analysts or other events.  Moreover, the stock
market has experienced  extreme  volatility that has  particularly  affected the
market  prices of equity  securities of many  technology  companies and that has
often been unrelated and  disproportionate to the operating  performance of such
companies.  Broad market fluctuations as well as economic  conditions  generally
and in the software industry specifically, may adversely affect the market price
of V-ONE's Common Stock.

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
expiration of the lease.  The Company  subleases 6,782 square feet of this space
on an adjacent floor, concurrent with the expiration date of the master lease.

ITEM 3.  LEGAL PROCEEDINGS

None.

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, 2001.


                                       14
<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,
2002.  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, 2001.



                                             2001
                         HIGH SALE PRICE              LOW SALE PRICE
                         ---------------              --------------
        First Quarter       $ 3.19                     $ 0.53
        Second Quarter      $ 2.80                     $ 0.94
        Third Quarter       $ 1.49                     $ 0.85
        Fourth Quarter      $ 1.98                     $ 0.89

                                             2000
                         HIGH SALE PRICE              LOW SALE PRICE
                         ---------------              --------------

        First Quarter       $ 9.50                     $ 4.88
        Second Quarter      $ 5.84                     $ 2.06
        Third Quarter       $ 5.18                     $ 2.19
        Fourth Quarter      $ 2.68                     $ 0.53

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,  current and anticipated  cash needs and restrictions on the
payment of dividends on Series C and Series D Preferred  Stock,  as discussed in
Note 6 to the financial statements beginning on page 28 of this Annual Report on
Form 10-K.

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, 1999,  2000 and 2001
and balance sheets as of December 31, 2000 and 2001 are derived from the audited
financial  statements of the Company  included  elsewhere in this Annual Report.
The following  financial  data as of December 31, 1997,  1998,  and 1999 and for
each of the years ended  December  31, 1997 and 1998 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."


                                       15
<PAGE>


<TABLE>
                                                           Year ended December 31,
                                 ----------------------------------------------------------------------------
Statement of Operations Data:         1997          1998           1999            2000             2001
                                      -----         -----          -----           -----            ----
<S>                                <C>          <C>               <C>             <C>              <C>
Revenues:
   Products                        $5,470,230   $ 5,798,542      $ 3,427,422     $3,356,086       $3,669,817
   Consulting and services            502,771       461,263        1,538,258      1,197,544        1,320,345
                                   ----------   -----------       -----------     ----------       ----------
      Total revenues                5,973,001     6,259,805        4,965,680      4,553,630        4,990,162


Cost of revenues:
   Products                         1,848,871     1,623,396          973,866        441,752          824,305
   Consulting and services            386,314       241,683          328,333        278,327          509,570
                                   ----------   -----------       -----------     ---------       ----------
      Total cost of revenues        2,235,185     1,865,079        1,302,199        720,079        1,333,875
                                   ----------   -----------       -----------     ---------       ----------
Gross profit                        3,737,816     4,394,726        3,663,481      3,833,551        3,656,287

Operating expenses:
   Research and development         3,153,941     2,618,914        2,848,955      3,440,397        4,009,889
   Sales and marketing              7,428,275     7,132,656        6,491,987      6,041,926        4,891,170
   General and administrative       3,699,278     3,896,210        3,118,829      3,517,068        2,537,103
                                   ----------   -----------       -----------    ----------       ----------
      Total operating expenses     14,281,494    13,647,780       12,459,771     12,999,391       11,438,162
                                   ----------   -----------       -----------    ----------       ----------
Operating loss                    (10,543,678)   (9,253,054)      (8,796,290)    (9,165,840)      (7,781,875)


Other income (expense):
   Interest expense                   (13,130)      (65,372)        (676,443)       (25,945)         (11,560)
   Interest income                    341,469       125,030          164,841        329,770          249,575
   Other income                             -             -                -              -        1,306,582
                                   ----------   -----------       ----------     ----------       ----------
      Total other income (expense)    328,339        59,658         (511,602)       303,825        1,544,597
                                   ----------   -----------       -----------    ----------       ----------

Loss before extraordinary item    (10,215,339)   (9,193,396)      (9,307,892)    (8,862,015)      (6,237,278)
                                   ----------   -----------       ----------     ----------       ----------
Extraordinary item -  early
   extinguishment of  debt                  -             -         (372,052)              -                -
                                   ----------   -----------       ----------     ----------       ----------
Net loss                          (10,215,339)   (9,193,396)      (9,679,944)    (8,862,015)      (6,237,278)

Dividends on preferred stock           12,600       110,879          272,245        369,979          741,245
Deemed dividends on preferred
stock                                 600,000       102,755                -              -        2,932,023
                                   ----------   -----------       ----------     ----------       ----------
Net loss attributable to
holders of common stock          $(10,827,939) $ (9,407,030)    $ (9,952,189)  $ (9,231,994)     $(9,910,546)
                                 ============  =============   =============  =============     ============

Basic and diluted loss per share:

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

Weighted average number of
common shares outstanding          12,868,859    13,898,450       16,938,205     20,871,076       22,576,188
                                  ============  ===========       ==========     ==========       ==========


                                                                 December 31,
                                     ---------------------------------------------------------------------
                                           1997           1998         1999         2000         2001
                                           -----          -----        -----        -----        ----
Balance Sheet Data:

Working capital (deficit)               $ 5,912,046   $(1,277,368) $ 6,629,846  $ 1,591,967   $2,164,448
Total assets                             10,313,276     3,922,192    9,775,436    5,450,618    4,732,324
Long-term debt, less current portion        300,861       197,982      119,746       47,803            -
Series A Convertible Preferred Stock      3,766,297             -            -            -            -
Series B Convertible Preferred Stock              -             -        1,288        1,288            -
Series C Redeemable Preferred Stock               -             -          335           55           43
Series D Convertible Preferred Stock              -             -            -            -        3,675
Total shareholder's equity                4,211,210       635,725    7,841,603    2,721,581    2,882,367
</TABLE>


                                       16
<PAGE>


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

FORWARD-LOOKING INFORMATION

All forward-looking  information  contained in this Management's  Discussion and
Analysis  of  Financial   Condition  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.

See pages 12 through 15 for a more  detailed  discussion of the factors that may
affect the Company's business.

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.  The Company does not have any
off balance sheet arrangements or significant transactions with related parties.

CRITICAL ACCOUNTING POLICIES
V-ONE considers  certain  accounting  policies  related to revenue  recognition,
capitalized  software  development costs and valuation of accounts receivable to
be critical policies due to the estimation processes involved in each.

REVENUE RECOGNITION
V-ONE's  revenue  recognition  policy  is  critical  because  revenue  is a  key
component  of the  Company's  results of  operations.  The Company  follows very
specific and detailed guidelines in measuring revenue; however certain judgments
affect the  application of the Company's  revenue  policy.  Revenue  results are
difficult  to  predict,  and any  shortfall  in revenue or delay in  recognizing
revenue  could cause  operating  results to vary  significantly  from quarter to
quarter and could result in future operating losses.

CAPITALIZED SOFTWARE DEVELOPMENT COSTS
V-ONE's  policy on  capitalized  software  costs  determines  the  timing of the
Company's  recognition of certain  development  costs. In addition,  this policy
determines  whether the cost is  classified  as  development  expense or cost of
license fees. Management is required to use professional judgment in determining
whether   development   costs  meet  the  criteria  for  immediate   expense  or
capitalization.

VALUATION OF ACCOUNTS RECEIVABLE
V-ONE maintains  allowances for doubtful accounts for estimated losses resulting
from the inability of its customers to make required payments.  If the financial
condition of V-ONE's  customers were to deteriorate,  resulting in an impairment
of their ability to make payments, additional allowances may be required.



                                       17
<PAGE>



RESULTS OF OPERATIONS

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

<TABLE>
                                                            Year ended December 31,
                                                   --------------------------------------
                                                     1999           2000         2001
                                                   ----------     ---------    ---------
<S>                                                  <C>           <C>          <C>

Revenues:

Products                                                69.0 %        73.7 %       73.5 %

Consulting and services                                 31.0          26.3         26.5
                                                     -------       -------      -------

Total revenues                                         100.0         100.0        100.0
                                                     -------       -------      -------

Cost of revenues:

Products                                                19.6           9.7         16.5

Consulting and services                                  6.6           6.1         10.2
                                                     -------       -------      -------

Total cost of revenues                                  26.2          15.8         26.7
                                                     -------       -------      -------

Gross profit                                            73.8          84.2         73.3

Operating expenses:

Research and development                                57.4          75.6         80.4

Sales and marketing                                    130.7         132.7         98.1

General and administrative                              62.8          77.2         50.8
                                                     -------       -------      -------

Total operating expenses                               250.9         285.5        229.3
                                                     -------       -------      -------
Operating loss                                       (177.1)        (201.3)      (156.0)

Other income (expense):

Interest expense                                       (13.6)         (0.5)        (0.2)

Interest income                                          3.3           7.2          5.0

Other income                                              -              -         26.2

Total other income (expense)                           (10.3)          6.7         31.0
                                                     -------       -------      -------

Loss before extraordinary item                        (187.4)       (194.6)      (125.0)

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

                                                     -------       -------      -------
Net loss                                              (194.9)       (194.6)      (125.0)

Dividends on preferred stock                             5.5           8.1         14.9

Deemed dividends on preferred stock                        -             -         58.7
                                                     -------       -------      -------

Loss attributable to holders of Common Stock          (200.4) %     (202.7) %    (198.6) %
                                                     =======       =======      =======
</TABLE>



                                       18
<PAGE>


COMPARISON OF FISCAL 2001 AND 2000

REVENUES

Total revenues increased to approximately  $4,990,000 in 2001 from approximately
$4,554,000  in 2000.  Product  revenues are derived  principally  from  software
licenses  and the sale of  hardware  products.  Product  revenues  increased  to
approximately  $3,670,000 in 2001 from  approximately  $3,356,000  in 2000.  The
increase in product  revenues from 2000 to 2001 was due  principally  to revenue
derived from initial  recognition  of revenue under the Company's  Licensing and
Distribution  Agreement with Citrix Systems, Inc. that was initially executed in
2000,  which  amounted to  approximately  $1,236,000  in sales of the  Company's
SmartGate product, offset by a decrease in revenues from other customers.

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 to approximately $1,320,000
in 2001 from approximately $1,198,000 in 2000.

COSTS OF REVENUES

Total costs of revenue as a percentage of total revenues were 26.7% and 15.8% in
2001 and 2000,  respectively.  The percentage  increase of 10.9% is comprised of
higher costs of product  revenue  which  increased to 16.5% in 2001 from 9.7% in
2000 and higher costs of  consulting  and services  revenue  which  increased to
10.2% of total revenues in 2001 from 6.1% in 2000.

Costs of product revenue consist  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.  Costs of product revenue
increased to approximately $824,000 in 2001 from approximately $442,000 in 2000,
an increase of $382,000.  Costs of product  revenue as a  percentage  of product
revenues  was 22.5% and 13.2% for 2001 and 2000,  respectively.  The  dollar and
percentage increases in 2001 over 2000 were attributable in part to a higher mix
of  SmartGuard  and SmartWall  products and turnkey  hardware  sales  (increased
$273,000  or 5.5% of total  revenues),  which  have  higher  costs of  revenues,
compared to SmartGate software licenses.  An additional factor in the dollar and
percentage  increase was the impact of the  write-off  of obsolete  inventory in
2001 which amounted to an increase over 2000 of approximately  $153,000, or 3.1%
of total revenues.

Costs of consulting and services  revenue  consist  principally of personnel and
related costs incurred in providing consulting, support and training services to
customers.  Costs of consulting  and services  revenue  increased by $232,000 to
approximately  $510,000 in 2001 from $278,000 in 2000, due partially to a larger
portion of third  party  products  with  proportionately  higher  support  costs
(increased  $104,000 or 2.1% of total  revenues),  and higher  costs of training
(increased $80,000, or 1.6% of total revenue).  Costs of consulting and services
revenue as a percentage of consulting and services revenues were 38.6% and 23.2%
for 2001 and 2000, respectively.

OPERATING EXPENSES

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 to approximately
$4,010,000  in  2001  from  approximately   $3,440,000  in  2000.  Research  and
development  expenses as a percentage of total  revenues were 75.6% and 80.4% in
2000 and 2001,  respectively.  The dollar and percentage  increases in 2001 over
2000 of  approximately  $570,000 and 4.8%,  respectively,  were primarily due to
increases  in the costs of  personnel,  higher by  approximately  $262,000,  and
consulting  services,  higher by  approximately  $167,000,  associated  with the
Company's product  development  efforts.  The Company believes that a continuing
commitment  to research  and  development  is  required  to remain  competitive.


                                       19
<PAGE>

Accordingly,  if cash  resources  allow,  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.

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 to approximately  $4,891,000 in 2001 from
approximately  $6,042,000 in 2000. Sales and marketing  expenses as a percentage
of total  revenues  were  98.0% and 132.7% in 2001 and 2000,  respectively.  The
dollar decrease of $1,151,000 and percentage decrease of 34.7% in 2001 from 2000
were principally due to lower costs of personnel (decreased $774,000 or 15.5% of
total revenues),  lower levels of advertising and promotion expenses  (decreased
$294,000  or 5.9% of total  revenues),  and  lower  costs of  travel  (decreased
$287,000  or 5.8% of total  revenues),  offset  in part by  additional  costs of
consulting (increased $448,000 or 9.0% of total revenues) in 2001 over 2000.

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  to
approximately  $2,537,000 in 2001 from approximately $3,517,000 in 2000. General
and  administrative  expenses as a percentage  of total  revenues were 50.8% and
77.2% in 2001 and 2000,  respectively.  The decrease in expense in 2001 resulted
from lower costs of personnel  (decreased  $610,000 or 12.2% of total  revenues)
and lower legal costs  (decreased  $289,000 or 5.8% of total  revenues)  in 2001
compared  with 2000.  The  decrease in percent of revenues of 26.4%  consists of
lower  expenses  of 21.5% and  higher  revenues  of 4.9% for 2001.  The  Company
anticipates that general and administrative  expenses,  as a percent of revenue,
will decrease in future periods.

Other Income (Expense) -- Other income (expense)  represents interest income and
expense and other income.  Interest income  represents  interest earned on cash,
cash equivalents and marketable  securities.  Interest income was  approximately
$250,000  in 2001  compared to  $330,000  in 2000.  Interest  income was derived
primarily  from  interest  earned on the  proceeds  from the  Company's  private
placements.   Interest  expense  represents  interest  payable  or  accreted  on
promissory  notes  and  capitalized  lease  obligations.  Interest  expense  was
approximately $12,000 and $26,000 in 2001 and 2000,  respectively.  Other income
in 2001 of approximately  $1,307,000 represents the gain on the sale of its 6.8%
holding in the stock of NFR Security, Inc. (formerly Network Flight Recorder).

Income  Taxes -- The Company did not incur  income tax  expenses in December 31,
2001 and 2000 as a result of the net loss incurred  during these periods.  As of
December  31,  2001,  the  Company  had net  operating  loss carry  forwards  of
approximately  $48,600,000 as a result of net losses  incurred since  inception.
These net losses result in a future tax benefit of $19,019,000 which can be used
to offset future taxable income.

Dividends  on  Series  C  and  D  Preferred   Stock  --  The  Company   provided
approximately  $370,000 for a dividend on the Series C Stock  during  2000,  and
approximately $741,000 for dividends on both the Series C and Series D Preferred
Stock during 2001.

Deemed  Dividends on Series D Preferred  Stock -- In 2001, the Company  recorded
deemed  dividends of $2,932,000 on the Series D Preferred  Stock,  in accordance
with  accounting  treatment for  convertible  preferred  stock with a beneficial
conversion  feature.  The  proceeds  received  in  the  transaction  were  first
allocated  between the  convertible  instrument and the detachable  warrant on a
relative fair value basis.  The difference  between the fair market value of the
Common  Stock on the  commitment  date and the  effective  conversion  price was
recorded as a deemed dividend.



                                       20
<PAGE>


COMPARISON OF FISCAL 2000 AND 1999

REVENUES

Total revenues decreased to approximately  $4,554,000 in 2000 from approximately
$4,966,000  in 1999.  Product  revenues are derived  principally  from  software
licenses  and the sale of  hardware  products.  Product  revenues  decreased  to
approximately  $3,356,000 in 2000 from  approximately  $3,427,000  in 1999.  The
principal  reason for the  decrease  in fiscal 2000 was  declining  sales of the
Company's SmartWall products and hardware turnkey systems.

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 decreased to approximately $1,198,000
in 2000 from approximately $1,538,000 in 1999.

COSTS OF REVENUES

Total costs of revenue as a percentage of total revenues were 15.8% and 26.2% in
2000 and 1999, respectively.

Costs of product revenue consist  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.  Costs of product revenue
decreased to approximately $442,000 in 2000 from approximately $974,000 in 1999.
Costs of product revenue as a percentage of product revenues was 13.2% and 28.4%
for 2000 and 1999,  respectively.  The dollar and  percentage  decreases in 2000
were attributable to a lower mix of SmartWall products and turnkey hardware when
compared to sales of SmartGate software licenses.

Costs of consulting and services  revenue  consist  principally of personnel and
related costs incurred in providing consulting, support and training services to
customers.  Costs of  consulting  and  services  revenue  decreased  slightly to
$278,000 in 2000 from  approximately  $328,000 in 1999.  Costs of consulting and
services revenue as a percentage of consulting and services  revenues were 23.2%
and 21.3% for 2000 and 1999, respectively.  The percentage decrease from 1999 to
2000 was  principally  due to a smaller  amount  of third  party  products  with
proportionately lower support costs.

OPERATING EXPENSES

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  $2,849,000 in 1999 to approximately  $3,440,000 in 2000. Research
and development  expenses as a percentage of total revenues were 57.4% and 75.6%
in 1999 and 2000, respectively. The dollar and percentage increases in 2000 were
primarily  due to increases in the number of personnel and  consulting  services
associated with the Company's product development efforts.

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 $6,492,000 in 1999 to approximately
$6,042,000  in 2000.  Sales and  marketing  expenses  as a  percentage  of total
revenues  were  130.7%  and  132.7% in 1999 and 2000,  respectively.  The dollar
decreases in 2000 were principally due to personnel turnover and lower levels of
advertising and promotion expenses.

General  and  Administrative  -- General  and  administrative  expenses  consist
principally of the costs of finance, management and administrative personnel and
facilities  expenses.   General  and  administrative   expenses  increased  from
approximately  $3,119,000 in 1999 to approximately  $3,517,000 in 2000.  General
and  administrative  expenses as a percentage  of total  revenues were 62.8% and


                                       21
<PAGE>

77.2% in 1999 and 2000,  respectively.  The increase in expense in 2000 resulted
from higher professional fees and certain non-recurring severance costs.

Other (Expense)  Income -- Interest income  represents  interest earned on cash,
cash equivalents and marketable  securities.  Interest income was  approximately
$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  $676,000  and  $26,000  in 1999 and 2000,
respectively.   The  interest   expense  in  1999  relates  to  financing  costs
attributable  to the  Company's  secured loan to  Transamerica  Business  Credit
Corporation.   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,
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  Preferred  Stock -- The  Company  provided  approximately
$272,000  for a dividend  on the  Series C  Preferred  Stock  during  1999,  and
approximately $370,000 for 2000.

LIQUIDITY AND SOURCES OF CAPITAL

The  Company's  operating  activities  used  cash of  approximately  $7,771,000,
$6,700,000 and  $9,263,000 in 2001,  2000 and 1999,  respectively.  Cash used in
operating  activities was used primarily to increase engineering staff necessary
to complete the private labeled product for Citrix Systems,  Inc., required as a
specific deliverable under the Company's contract with Citrix, complete delivery
of the  Company's  enhanced  4.2  product  and  complete  and  launch  the V-ONE
SmartGuard  Appliance  product  suite.  The  increase in cash used in  operating
activities in 2001 includes an increase of $570,000 in engineering  expenses,  a
reduction  of  approximately  $2,131,000  in sales,  marketing  and  general and
administrative  expenses,  and a drop in  accounts  payable of  $607,000  and in
deferred  revenue of  ($161,000).  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.

Net capital expenditures for property and equipment were approximately $370,000,
$774,000 and $176,000 in 2001, 2000 and 1999  respectively.  These  expenditures
have generally been for computer  workstations  and personal  computers,  office
furniture and equipment,  and leasehold additions and improvements.  The capital
expenditures  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.  The  capital  expenditures  decreased  in  2001  due in  part  to
conservation of funds.

As of December  31,  2001,  the  Company's  principal  commitments  consisted of
obligations  outstanding under a series of capital leases of computer  equipment
and the facility lease for its office space.  V-ONE's current  aggregate  annual
rent  obligation is  approximately  $577,000 for 2002 and $341,000 for 2003. The
current  aggregate  capital lease obligation is $50,059,  all of which is due in
2002.

In February 2001 the Company  completed a private placement of equity securities
resulting in net proceeds of  approximately  $6.3 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.



                                       22
<PAGE>

A  significant  portion of the proceeds  received from the February 2001 private
placement and the sale of V-ONE's holding in NFR Security,  Inc. was used during
fiscal  2001  for  general  working  capital  purposes,   including  funding  of
operations  and cash flow  requirements.  Notwithstanding  acceptance of V-ONE's
security  concepts  and  critical  acclaim  for its  products,  there  can be no
assurance  that the  consummation  of  sales of  V-ONE's  products  to  existing
customers or proposed  agreements with potential  customers will generate timely
or  sufficient  revenue for V-ONE to cover future costs of  operations  and meet
future  cash flow  requirements.  The  Company  has  sought  additional  capital
investments, thus far without success. Accordingly, V-ONE may not have the funds
needed to sustain  operations during 2002, and its audited financial  statements
are presented subject to a "going concern" opinion.  Nor may the Company be able
to continue  to satisfy the Nasdaq  Small Cap Market  listing  requirements.  In
addition to continuing to pursue capital investment,  the Company engaged Updata
Capital to  explore  other  alternatives  to  preserve  V-ONE's  operations  and
maximize   shareholder   value,   including   potential   strategic   partnering
relationships,  a business combination with a strategically placed partner, or a
sale of V-ONE.

To preserve cash resources,  the Company will reduce  operating levels effective
on April 1, 2002.  For the immediate  future,  V-ONE will focus  exclusively  on
existing and potential customers in the government sector,  curtailing sales and
marketing operations to commercial  accounts,  reduce general and administrative
expenditures and all possible capital expenditures,  and effect staff reductions
approximating  25% of its  employees.  V-ONE may not be  successful  in  further
reducing operating levels or, even at reduced operating levels, V-ONE may not be
able to maintain  operations for any extended period of time without  additional
capital or a significant  strategic  transformative  event.

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.

                                       23
<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                                V-ONE CORPORATION
                          INDEX TO FINANCIAL STATEMENTS

                                    --------



         Report of Independent Auditors                                      27

         Balance Sheets                                                      28

         Statements of Operations                                            29

         Statements of Stockholders' Equity                                  30

         Statements of Cash Flows                                            31

         Notes to Financial Statements                                       32

         Schedule of Valuation and Qualifying Accounts for the years ended
              December 31, 1999, 2000 and 2001                               49



                                       24
<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,  2001  and  2000,  and  the  related   statements  of
         operations,  stockholders' equity, and cash flows for each of the three
         years in the period ended  December 31, 2001.  Our audits also included
         the financial statement schedule for the years ended December 31, 2001,
         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,  2001 and 2000,  and the  results of its
         operations and its cash flows for each of the three years in the period
         ended  December 31, 2001,  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,
         2001,  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.

         The accompanying  financial statements have been prepared assuming that
         V-ONE  Corporation  will  continue  as a going  concern.  As more fully
         described  in Note 2, the Company has  incurred  significant  operating
         losses since inception.  This condition raises  substantial doubt about
         the  Company's  ability to  continue as a going  concern.  Management's
         plans  in  regard  to this  matter  are also  described  in Note 2. The
         financial  statements  do not  include any  adjustments  to reflect the
         possible future effects on the  recoverability  and  classification  of
         assets or the amounts and classification of liabilities that may result
         from the outcome of this uncertainty.

                                                     /s/ Ernst & Young LLP

         McLean, Virginia
         January 29, 2002


                                       25
<PAGE>




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


                                                                                  December 31,
                                                                         --------------------------------
                                ASSETS                                       2001             2000
                                                                             ----             ----
<S>                                                                    <C>             <C>
 Current assets:
      Cash and cash equivalents                                        $     2,608,690 $       2,949,398
      Accounts receivable, less allowances of $72,035 and
           $105,664, respectively                                              859,658           776,845
      Inventory, less allowances of $29,593 and $78,656,
           respectively                                                         57,354           172,177
      Prepaid expenses and other current assets                                407,913           254,631
                                                                         --------------  ----------------
          Total current assets                                               3,933,615         4,153,051

 Property and equipment, net                                                   748,513           929,398
 Other assets                                                                   50,196
                                                                                                 368,169
                                                                         --------------  ----------------
             Total assets                                              $     4,732,324 $       5,450,618
                                                                         ==============  ================

                 LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
      Accounts payable and accrued expenses                            $       769,319 $       1,375,939
      Deferred revenue                                                         952,044         1,113,202
      Capital lease obligations - current                                       47,804            71,943
                                                                         --------------  ----------------
           Total current liabilities                                         1,769,167         2,561,084
     Deferred rent                                                              80,790           120,150
     Capital lease obligations - noncurrent                                          -            47,803
                                                                         --------------  ----------------
           Total liabilities                                                 1,849,957         2,729,037

 Stockholders' equity:
       Preferred stock, $0.001 par value; 13,333,333 shares authorized:
           Series B convertible preferred stock, zero and                            -             1,288
             1,287,554 designated, issued and outstanding,
             respectively

          Series C redeemable preferred stock, 500,000 designated,
             42,904 and 54,714 shares issued and outstanding, respectively
             (liquidation preference of $1,126,230 and $1,436,243)                  43                55


           Series D convertible preferred stock, 3,675,000 designated,
             issued and outstanding in 2001 (liquidation preference of
             $7,019,500 and zero, respectively)                                  3,675                 -

           Common Stock, $0.001 par value; 50,000,000 shares authorized;
             23,594,904 and 22,109,185 shares issued and outstanding,
             respectively                                                       23,595            21,109
     Accrued dividends payable                                                 875,808           180,911
     Additional paid-in capital                                             60,766,392        51,393,818
     Accumulated deficit                                                   (58,787,146 )     (48,876,600 )
                                                                         --------------  ----------------
                     Total stockholders' equity                              2,882,367         2,721,581
                                                                         --------------  ----------------
                     Total liabilities and stockholders' equity        $     4,732,324 $       5,450,618
                                                                         ==============  ================

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


                                       26
<PAGE>


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


                                                                Year ended December 31,
                                                 -------------------------------------------------------
                                                     2001                2000               1999
                                                     ----                ----               ----
<S>                                            <C>                 <C>                <C>
           Revenues:
                Products                       $     3,669,817     $     3,356,086    $     3,427,422
                Consulting and services              1,320,345           1,197,544          1,538,258
                                                 -------------------------------------------------------
                    Total revenues                   4,990,162           4,553,630          4,965,680

           Cost of revenues:
                Products                               824,305             441,752            973,866
                Consulting and services                509,570             278,327            328,333
                                                 -------------------------------------------------------
                    Total cost of revenues           1,333,875             720,079          1,302,199
                                                 -------------------------------------------------------

           Gross profit                              3,656,287           3,833,551          3,663,481

           Operating expenses:
                Research and development             4,009,889           3,440,397          2,848,955
                Sales and marketing                  4,891,170           6,041,926          6,491,987
                General and administrative           2,537,103           3,517,068          3,118,829
                                                 -------------------------------------------------------
                    Total operating expenses        11,438,162          12,999,391         12,459,771
                                                 -------------------------------------------------------

           Operating loss                           (7,781,875 )        (9,165,840 )       (8,796,290 )

           Other income (expense):
                Interest expense                       (11,560 )           (25,945 )         (676,443 )
                Interest income                        249,575             329,770            164,841
                Other income                         1,306,582                   -                  -
                                                 -------------------------------------------------------
                    Total other income               1,544,597             303,825           (511,602 )
                    (expense)

           Loss before extraordinary item           (6,237,278 )        (8,862,015 )       (9,307,892 )

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

           Net loss                                 (6,237,278 )        (8,862,015 )       (9,679,944 )

           Dividends on preferred stock                741,245             369,979            272,245
           Deemed dividends on preferred stock       2,932,023                   -                  -
                                                 -------------------------------------------------------

           Net loss attributable to holders
                of common stock                $    (9,910,546 )   $    (9,231,994 )  $    (9,952,189 )
                                                 =======================================================

           Basic and diluted loss per share:
                Loss before extraordinary item $         (0.44 )    $        (0.44 )   $        (0.57 )
                                                 =======================================================
                Net loss attributable to
                    holders of common stock    $         (0.44 )    $        (0.44 )   $        (0.59 )
                                                 =======================================================
           Weighted average number of
                 common shares outstanding          22,576,188          20,871,076         16,938,205
                                                 =======================================================

   The accompanying notes are an integral part of these financial statements.

</TABLE>


                                       27
<PAGE>



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




                                                   Series B, C & D  Accrued   Additional
                                 Common Stock      Preferred Stock  Dividends 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, 1998   16,478,046   $16,478         -   $   - $     -  $30,361,685  $   (50,021) $(29,692,417) $   635,725
Exercise of common stock
   options, net of issuance     848,629       848         -       -       -    2,669,882           -            -      2,670,730
   costs
Exercise of warrants            907,105       907         -       -       -    2,863,001           -            -      2,863,908
Issuance of Series B
   preferred stock, net               -         -  1,287,554   1,288      -    2,981,212           -            -      2,982,500
   issuance costs
Issuance of Series C
   preferred stock, net of            -         -    335,000     335      -    7,918,349           -            -      7,918,684
   issuance costs
 Adjustment and collection
   of notes receivable for            -         -         -       -       -           -                         -         46,236
   stock                                                                                       46,236
Issuance of common stock
   warrants                           -         -         -       -       -      310,000           -            -        310,000
Dividends 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      59,500        60         -       -       -      169,637           -            -        169,697
   costs
Conversion of Series C
   preferred stock to         2,900,309     2,901   (280,286)   (280)(461,313)   458,676           -            -           (16)
   common stock
Adjustment and collection
   of notes receivable for            -         -         -       -       -           -         3,785           -          3,785
   stock
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

Employee stock purchase
   plan, net of issuance         29,399        29                                 11,980                                  12,009
   costs
Exercise of common stock
   options, net of issuance      31,230        31                                 50,774           -            -         50,805
   costs
Conversion of Series B
   preferred stock to         1,287,554     1,288 (1,287,554) (1,288)     -           -            -            -            -
   common stock
Conversion of Series C
   preferred stock to           137,536       138    (11,810)    (12) (46,348)   (38,482)          -            -        (84,704)
   common stock
Issuance of Series D
   preferred stock, net of                         3,675,000   3,675           6,266,047                               6,269,722
   issuance costs
Deemed dividends on
   preferred stock                                                             2,932,023                 (2,932,023)            -
Dividends on preferred stock          -         -                     741,245                              (741,245)            -
Issuance of common stock
   options to consultants             -         -         -       -       -      150,232           -            -        150,232
Net loss                              -         -         -       -       -           -                  (6,237,278)  (6,237,278)
                             ---------------------------------------------------------------------------------------------------
Balance, December 31, 2001   23,594,904   $23,595  3,717,904  $3,718 $875,808$60,766,392 $         -   $(58,787,146) $ 2,882,367
                             ===================================================================================================

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


                                       28
<PAGE>

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



                                                                   Year ended December 31,
                                                    -------------------------------------------------------
                                                         2001              2000              1999
                                                         ----              ----              ----
<S>                                                 <C>                 <C>                <C>
     Cash flows from operating activities:
        Net loss                                      $ (6,237,278 )    $ (8,862,015 )    $ (9,679,944 )

       Adjustments to reconcile net loss to net
       cash used in operating activities:
          Depreciation                                     551,165           429,939           464,879
          Amortization                                           -                 -           255,378
          Gain on sale of investment                    (1,375,000 )               -                 -
          Amortization of deferred financing costs               -                 -           730,000
          Forgiven subscription receivable                       -                 -            46,114
          Noncash charge related to issuance of
              warrants and options                         150,232           377,422            93,764
     Changes in operating assets and liabilities:
          Accounts receivable, net                         (82,813 )          78,008          (341,632 )
          Inventory, net                                   114,823          (126,090 )
                                                                                               339,394
          Prepaid expenses and other assets                (85,309 )         529,045           105,755
          Accounts payable and accrued expenses           (606,620 )         218,279          (966,496 )
          Deferred revenue                                (161,158 )         692,280          (467,373 )
          Deferred rent                                    (39,360 )         (36,561 )         156,711
                                                    ---------------------------------------------------
                 Net cash used in operating             (7,771,318 )      (6,699,693 )      (9,263,450 )
                 activities

     Cash flows from investing activities:
          Net purchases of property and equipment         (370,280 )        (773,629 )        (176,033 )
          Collection of subscription receivable                  -             3,785               122
          Proceeds from sale of investment               1,625,000                 -
                                                    ---------------------------------------------------
     Net cash provided by (used in) investing            1,254,720          (769,844 )        (175,911 )
     activities

     Cash flows from financing activities:
          Issuance of common stock                          23,949                 -                 -
          Issuance of preferred stock, net of
                subscriptions receivable                 7,019,250         3,375,000        11,793,750
          Payment of debt financing costs                        -                 -          (420,000 )
          Payment of preferred stock dividends                (259 )             (16 )               -
          Payment of stock issuance costs                 (761,468 )        (183,895 )        (941,875 )
          Redemption of preferred stock                    (84,445 )               -                 -
          Exercise of stock options and warrants            50,805           169,697         5,583,946
          Principal payments on capital lease              (71,942 )         (78,794 )         (70,217 )
            obligations
          Repayment of notes payable                             -                 -            (5,259 )
                                                    ---------------------------------------------------
              Net cash provided by financing             6,175,890         3,281,992        15,940,345
              activities                            ---------------------------------------------------


     Net (decrease) increase in cash and cash
         equivalents                                      (340,708 )      (4,187,545 )       6,500,984
                                                    ---------------------------------------------------
     Cash and cash equivalents, beginning of year        2,949,398         7,136,943           635,959
                                                    ---------------------------------------------------

     Cash and cash equivalents, end of year            $ 2,608,690       $ 2,949,398       $ 7,136,943
                                                    ===================================================

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


                                       29
<PAGE>

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.       MANAGEMENT'S PLANS

         The accompanying  financial  statements have been prepared assuming the
         Company will continue as a going  concern.  The Company  reported a net
         loss of  $6,237,278,  $8,862,015  and  $9,679,944  for the years  ended
         December 31, 2001, 2000 and 1999, respectively. In addition the Company
         expects to continue to incur losses during 2002.

         V-ONE's  cash  used in  operating  activities  was  approximately  $7.8
         million  in  fiscal  2001,  an  average  "burn  rate" of  approximately
         $648,000  a  month.  Notwithstanding  acceptance  of  V-ONE's  security
         concepts,  there can be no assurance that the  consummation of sales of
         V-ONE's  products to existing  customers  or proposed  agreements  with
         potential  customers  will generate  timely or  sufficient  revenue for
         V-ONE  to  cover  its  cost  of  operations  and  meet  its  cash  flow
         requirements.  To preserve  cash  resources,  the  Company  will reduce
         operating levels effective on April 1, 2002. For the immediate  future,
         V-ONE will focus exclusively on existing and potential customers in the
         government  sector,   curtailing  sales  and  marketing  operations  to
         commercial accounts, reduce general and administrative expenditures and
         all  possible  capital   expenditures,   and  effect  staff  reductions
         approximating  25% of its employees.  The Company's ability to continue
         as a going  concern is dependent on its ability to generate  sufficient
         cash  flow to meet  its  obligations  on a timely  basis  or to  obtain
         additional funding.

         The Company has sought additional capital investments, thus far without
         success.  Accordingly,  V-ONE may not have the funds  needed to sustain
         operations  during 2002. In addition to  continuing  to pursue  capital
         investment,  the  Company  engaged  Updata  Capital  to  explore  other
         alternatives to preserve  V-ONE's  operations and maximize  shareholder
         value,  including  potential  strategic  partnering  relationships,   a
         business  combination with a strategically placed partner, or a sale of
         V-ONE.

         V-ONE may not be successful in further  reducing  operating  levels or,
         even at reduced  operating  levels,  V-ONE may not be able to  maintain
         operations for any extended period of time without  additional  capital
         or a significant strategic transformative event.

3.       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.



                                       30
<PAGE>

         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
         delivered   directly  to  the  end-user   customer  on  behalf  of  the
         distributor.

         In 2000, the Company  entered into a contract  which contains  multiple
         elements,  including  specified  upgrades.  Because the Company had not
         established  vendor  specific  objective  evidence  for  the  specified
         upgrades,  all revenues  under the  contract  were  deferred  until the
         upgrades are delivered.  At December 31, 2000, the Company had $500,000
         in deferred revenue related to this contract.  On October 26, 2001, the
         Company executed a new agreement which removed the specified  upgrades.
         This completed the Company's  obligations  for delivery of all specific
         product requirements under the initial contract and allowed the Company
         to  recognize  approximately  $1.2  million  of  revenue  in the fourth
         quarter.

         The Company's revenue recognition policies for the years ended December
         31,  2001,  2000 and  1999 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.

         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.  All other  research and
         development costs are expensed as incurred.

         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.



                                       31
<PAGE>


         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 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 $551,165, $429,939
         and  $464,879 for the years ended  December  31,  2001,  2000 and 1999,
         respectively.

         ADVERTISING COSTS

         The Company  expenses all  advertising  costs as incurred.  The Company
         incurred approximately  $149,000,  $177,000 and $98,400, in advertising
         costs  for  the  years  ended   December  31,  2001,   2000  and  1999,
         respectively.

         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 its term loan from
         Transamerica  Business  Credit  Corporation.  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


                                       32
<PAGE>

         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.

         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.

         No suppliers exceeded 10% of purchases in 1999 and 2000. In 2001, three
         suppliers  exceeded  10%  of  purchases.   The  Company  purchased  SUN
         equipment   worth   approximately   $162,000   from  Ingram  Micro  and
         approximately $180,000 from Arrow MOCA, Incorporated. The two resellers
         of SUN  equipment  represented  33%  and  37% of  total  purchases.  In
         addition,   the   Company   purchased   from   SteelCloud   Corporation
         approximately $88,000 worth of the Company's SmartGuard product,  which
         constituted approximately 18% of total purchases.

         During the years ended December 31, 2001, 2000, and 1999, 11%, 21%, and
         26%, respectively,  related to sales to international customers. During
         the years ended  December 31, 2001,  2000,  and 1999,  sales related to
         government agencies were 43%, 40%, and 35%, respectively.

         FAIR VALUE OF FINANCIAL INSTRUMENTS

         At December 31, 2001 and 2000, the carrying value of current  financial
         instruments  such as cash,  accounts  receivable,  inventory,  accounts
         payable,  accrued liabilities and capital lease obligation approximated
         their  market  values,  based  on the  short-term  maturities  of these
         instruments.  Fair value is  determined  based on expected  cash flows,
         discounted   at  market   rates,   and  other   appropriate   valuation
         methodologies.

         RECLASSIFICATIONS

         Certain  prior year  amounts have been  reclassified  to conform to the
         2001 presentation.


                                       33
<PAGE>

         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  adopted  SFAS 133  effective  January 1, 2001.  The
         adoption had no impact on the Company's financial statements.

  4.     SELECTED BALANCE SHEET INFORMATION

         Property and equipment consisted of the following at December 31:

<TABLE>
                                                            2001                2000
                                                       ---------------      --------------
<S>                                                  <C>                  <C>
         Office and computer equipment               $      1,423,083     $     1,391,217
         Office and computer equipment under
            capital leases                                    299,497             341,302
         Capitalized software                                 139,076              35,000
         Leasehold improvements                               177,664              89,504
         Furniture and fixtures                               257,978             310,268
                                                       ---------------      --------------
                                                            2,297,298           2,167,291
         Less:  accumulated depreciation                   (1,548,785 )        (1,237,893 )
                                                       ---------------      --------------
                                                     $        748,513     $       929,398
                                                       ===============      ==============
</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, $0 and $255,378,  relating
         to these agreements in 2001, 2000 and 1999, respectively.

         Other assets consisted of the following at December 31:

<TABLE>
                                                            2001               2000
                                                        --------------     -------------
<S>                                                  <C>                <C>
         Deposits                                    $         50,196   $       118,169
         Investment in Network Flight Recorder                      -           250,000
                                                        --------------     -------------
                                                     $         50,196   $       368,169
                                                        ==============     =============
</TABLE>

         The  Company  sold its  stock in NFR in  February  2001 for  $1,625,000
         resulting in a net gain of $1,375,000.

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

<TABLE>
                                                            2001               2000
                                                        --------------     -------------
<S>      <C>                                          <C>               <C>
         Accounts payable                             $      375,883    $       580,605
         Accrued compensation                                260,036            589,242
         Other accrued expenses                              133,400            206,092
                                                       --------------     --------------
                                                      $      769,319    $     1,375,939
                                                       ==============     ==============
</TABLE>

                                       34
<PAGE>

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>
                                                            2001               2000
                                                        --------------     -------------
<S>                                                  <C>                <C>
        Inventory                                    $          11,574  $          38,948
        Accounts receivable                                     28,173             40,807
        Property and equipment                                 (25,910)            18,203
        Deferred rent                                           31,598             46,402
        Non-deductible accruals                                 83,235             52,631
        Net operating loss carry forward                    19,019,278         16,282,345
                                                      ----------------    --------------
        Total deferred tax asset                            19,147,948         16,479,336
        Valuation allowance                                (19,147,948 )      (16,479,336 )
                                                      ----------------    ---------------
        Net deferred tax asset                      $                -  $               -
                                                      ================    ===============

</TABLE>

         The net  change  in the  valuation  allowance  from 2000 to 2001 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, 2001 and
         2000, the Company had net operating loss carryforwards of approximately
         $48,600,000  and  $42,200,000 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, 2000 and 2001 is as follows:

 <TABLE>
                                                            2001               2000
                                                        --------------     -------------
<S>                                                       <C>             <C>
         Federal income tax (benefit) at statutory rate      (34.0%)         (34.0%)
         State income taxes, net                              (4.6%)          (4.6%)
         Permanent items                                       0.2%           (0.1%)
         Net change in valuation allowance                    38.4%           38.7%
                                                          -----------     -------------
         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 received in
         two  installments  of $1.0 million  plus  accrued  interest in July and
         August  1999.  The  holders  of the  Series B Stock are  entitled  to a
         liquidation  preference of $2.33 per share.  During 2001, all shares of
         the Series B Stock were converted into Common Stock.


                                       35
<PAGE>


         SERIES C PREFERRED STOCK

         On September 9, 1999,  the Company  issued  335,000  shares of Series C
         Preferred Stock (the "Series C Stock") and  non-detachable  warrants to
         purchase   3,350,000   shares  of  the  Company's   Common  Stock  (the
         "Warrants")  to certain  accredited  investors.  Each share of Series C
         Stock was  issued a Warrant  to  purchase  ten  shares of Common  Stock
         (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
         as to payment of dividends and priority on  distribution 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 at the  Company's  option in cash or in
         shares of common  stock 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  shares 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.

         Throughout  2000,  certain  holders  of the  Series  C Stock  chose  to
         exercise  their warrants  through a 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. For the year ended December 31,
         2001 a total of  11,810  shares  of Series C Stock  were  remitted  for
         118,100  shares of Common Stock,  and an additional  19,436 shares were
         issued  as a result  of  dividends  earned  on the  Series C Stock.  At
         December  31,  2001  there  were  42,904   shares  of  Series  C  Stock


                                       36
<PAGE>

         outstanding.  The  dividend  payable on these shares  equals  $260,422,
         payable in cash or  equivalent  shares of Common  Stock at fair  market
         value at the conversion date.

         SERIES D CONVERTIBLE PREFERRED STOCK

         On February 14, 2001,  V-ONE issued  3,675,000 shares of Series D stock
         (the  "Series D Stock")  with  warrants to purchase  735,000  shares of
         Common  Stock  ("Series  D  Warrants").  The Series D Stock was sold in
         units, with each unit consisting of five shares of Series D Stock and a
         Series D Warrant to purchase  one share of Common  Stock.  The Series D
         Warrants are immediately  exercisable at a price of $2.29 per share and
         will remain exercisable until February 14, 2004.

         The Series D Stock bears cumulative  compounding dividends at an annual
         rate of 10.0% for the first  five  years,  12.5% for the sixth year and
         15.0% in and after the seventh year. The dividends may be paid in cash,
         or at the option of V-ONE,  in shares of registered  Common Stock.  The
         Series D Stock is  convertible  at any time into shares of Common Stock
         at the initial  conversion  price of $1.91 and the  initial  conversion
         ratio of one share of  Series D Stock  for one  share of Common  Stock.
         Both the conversion price and conversion ratio are subject to equitable
         adjustment for stock spits, stock dividends,  combinations, and similar
         transactions, and in the event V-ONE issues shares of Common Stock at a
         purchase price less than the then current  conversion price. The Series
         D Stock will be  automatically  converted  into  Common  Stock upon the
         closing of an  underwritten  public offering in excess of $20.0 million
         and at a price in excess of $3.00 per share.

         The Series D Stock ranks  senior to the Common  Stock and junior to the
         Series C Stock as to payment of dividends and priority on  distribution
         of  assets  upon  liquidation,  dissolution,  or  winding  up of V-ONE.
         Holders of the Series D Stock are entitled to a liquidation  preference
         equal to the  greater of (i) $1.91 plus any  unpaid  accrued  preferred
         dividends,  and (ii) the dollar  value per share for the Series D Stock
         that a holder of such  shares  would have been  entitled to receive had
         such shares been converted into Common Stock  immediately  prior to the
         liquidation,  dissolution or winding up of V-ONE.  There are no sinking
         fund provisions applicable to the Series D Stock.

         Except as to matters addressed in the next sentence, the holders of the
         Series D Stock  have the right to vote that  number of shares  equal to
         the number of shares of Common Stock  issuable  upon the  conversion of
         their Series D Stock and vote together with the holders of Common Stock
         as a single  class.  For so long as at least  51.0%  of the  number  of
         shares of Series D Stock  outstanding  on  February  14,  2001  remains
         outstanding, the affirmative vote or consent of the holders of at least
         51.0% of the then  outstanding  number  of  shares  of  Series D Stock,
         voting  separately  as a  class,  is  required  for (i)  the  voluntary
         liquidation,  dissolution or winding up of V-ONE,  (ii) the issuance of
         any  securities  senior to or on parity with the Series D Stock,  (iii)
         the declaration or payment of a cash dividend on all junior stocks, and
         (iv) certain  amendments to V-ONE's  certificate of  incorporation  and
         bylaws.

         V-ONE has the right to redeem the  outstanding  Series D Stock in whole
         at any time after  February 14,  2004,  and on or prior to February 14,
         2004 (i) upon the closing of an underwritten  public offering in excess
         of $20.0  million and at a price in excess of $3.00 per share,  or (ii)
         if the  average  closing  bid price of the Common  Stock for any twenty
         trading days during any thirty  trading days ending within five trading
         days prior to the date of notice of  redemption  is at least  $5.75 per
         share,  subject  in either  case to the right of any holder of Series D
         Stock to convert his,  hers,  or its Series D Stock into Common  Stock.
         The redemption price will be paid in cash in full and be the greater of
         $1.91  per  share or the fair  market  value of each  share of Series D
         Stock plus all unpaid dividends.



                                       37
<PAGE>

         Beginning on February  14,  2007,  and for each of the next three years
         thereafter,  the  holders  of Series D Stock  will have the  cumulative
         right to  require  V-ONE to redeem  annually  up to  one-fourth  of the
         Series D Stock  issued by V-ONE to each  such  holder.  The  redemption
         right can be settled  through  the  issuance  of Common  Stock,  at the
         option of V-ONE.  The redemption price for each share of Series D Stock
         is $1.91 per share plus all unpaid dividends.

         V-ONE has granted registration rights to the purchasers of Series C and
         Series D Stock  whereby V-ONE is obligated,  in certain  instances,  to
         register the shares of Common Stock  issuable  upon  conversion  of the
         Series D Stock and  exercise of the  warrants  attached to the Series C
         and Series D Stock.

         In 2001,  the  Company  recorded  a deemed  dividend  of  approximately
         $2,932,000  in  accordance  with  the  accounting  requirements  for  a
         beneficial  conversion  feature  on the  Series D Stock.  The  proceeds
         received  in the Series D offering  were first  allocated  between  the
         convertible  instrument  and the Series D Warrant  on a  relative  fair
         value  basis.  A  calculation  was  then  performed  to  determine  the
         difference  between the effective  conversion price and the fair market
         value of the Common Stock at the commitment date.

         COMMON STOCK

         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  separate  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  options to  purchase  848,629  shares of
         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 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.



                                       38
<PAGE>



         EMPLOYEE STOCK PURCHASE PLAN

         The  Company's  Board of  Directors  adopted  the 2001  Employee  Stock
         Purchase   Plan  ("Plan")  on  February  26,  2001  and  the  Company's
         stockholders approved of the Plan at the Annual Meeting of Stockholders
         on May 10, 2001. The Plan became  effective upon adoption by the Board,
         however, the first Offering Period (defined below) under the Plan began
         on the first  trading  day on or after  July 1, 2001.  Pursuant  to the
         Plan,  2,500,000  shares of  Common  Stock  were  reserved  for  future
         issuance by the Company to employees through the grant of stock options
         to  purchase  Common  Stock.  Shares  acquired  under  the  Plan may be
         authorized and unissued shares or treasury shares.

         The purpose of the Plan is to provide  employees of the Company with an
         opportunity  to  purchase  Common  Stock  through  accumulated  payroll
         deductions.  Under the Plan,  a  participating  employee  is granted an
         option to purchase  Common Stock that is exercised  automatically  at a
         specified  date set forth in the Plan. The purchase price for shares of
         Common Stock  received  upon exercise of the option is paid through the
         employee's   accumulated  payroll  deductions.   It  is  the  Company's
         intention to have the Plan qualify as an "Employee Stock Purchase Plan"
         under  Section 423 of the  Internal  Revenue  Code of 1986,  as amended
         ("Code").  The Plan  shall  be  construed  so as to  extend  and  limit
         participation in a manner  consistent with Section 423 of the Code. The
         Plan is not subject to the provisions of the Employee Retirement Income
         Security Act of 1974 or Section 401(a) of the Code.

         During the year ended  December 31, 2001,  29,399 shares were purchased
         by employees at various prices in accordance with the provisions of the
         Plan.

         WARRANTS

         In addition to the warrants  for 210,914  shares of Common Stock issued
         in 1999 in connection with a debt transaction and the warrants attached
         to the Series C and Series D Stock discussed  above, the Company issued
         the following  warrants to purchase Common Stock during the years ended
         December 31, 1999, 2000, and 2001:

         On November 21, 1997, the Company issued a warrant to purchase  300,000
         shares of Common  Stock with an  exercise  price of $3.125 per share 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 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,
         was  recognized  ratably  over the  four-month  term of the  consulting
         agreement.

         On  January  9, 2001 the  Company  granted  fully  vested  warrants  to
         purchase an additional  30,000  shares of Common Stock to  MindSquared,
         LLC, as part of the consulting agreement. The warrants have an exercise
         price of $0.625  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,  $15,307,
         was  recognized  ratably  over the  four-month  term of the  consulting
         agreement.

                                       39
<PAGE>

         During the years ended December 31, 2001 and 2000, warrants to purchase
         shares of Common  Stock that were  attached  to the Series C Stock were
         exercised  for an equal  number  of  shares  of  Common  Stock.  Of the
         original  warrants issued in the Series C offering 429,040 remain at an
         exercise price of $1.91 per share.

         During  2001,  in  connection   with  the  issuance  of  the  Series  D
         Convertible  Preferred Stock, the Company granted fully vested warrants
         to purchase  735,000 shares of Common Stock.  The Series D warrants are
         exercisable  at a price of  $2.29  and will  remain  exercisable  until
         February  14,  2004.  Pursuant to the terms of the  warrants  issued in
         connection  with a debt  transaction  in 1999, a price  adjustment  was
         created by the issuance of the Series D Stock. The warrants to purchase
         210,914  shares of Common  Stock were  reduced  in price to $1.91,  and
         additional  warrants to  purchase  57,411  shares of Common  Stock were
         issued to increase the number of warrants for  Transamerica  to 268,325
         at February 14, 2001.

         Warrants to purchase shares of the Company's  Common Stock  outstanding
         at December 31, 2000 and 2001 were as follows:

                        2000               2001    Exercise Price
                        ----               ----    --------------

                           -             30,000        $0.63
                     100,000            100,000        $1.19
                           -            697,365        $1.91
                           -            735,000        $2.29
                     139,485                  -        $2.33
                     547,140                  -        $2.63
                      71,429                  -        $2.65
                      10,000             10,000        $2.69
                     150,000            150,000        $3.13
                      54,000             54,000        $4.73
                 ------------    ---------------
                   1,072,054          1,776,365
                 ============    ===============


         At December 31, 2001,  warrants to purchase  1,776,365 shares of Common
         Stock were  exercisable.  The  weighted  average fair value of warrants
         granted  during  2001  was  estimated  at  $1.75.  The fair  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 3 or 5 years.

         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.



                                       40
<PAGE>



         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.

         At December  31, 2001,  2000 and 1999 there were 10,602  stock  options
         outstanding  under the 1995 Plan with a weighted average exercise price
         of $2.50.  There was no  activity  under the 1995 Plan during the three
         year period ended December 31, 2001.

         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.

         Awards  may be granted  under the 1996 Plan with  respect to a total of
         2,333,333  shares of Common  Stock.  As of December 31,  2001,  533,165
         options are  outstanding  of which  114,898 are vested,  and a total of
         775,934 options are available for grant under the 1996 Plan.

         Option  activity under the 1996 Plan for the two years ended December
         31, 2001 was as follows:

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

         Grants                                   455,400          $1.389
         Exercised                                 (1,750)         $2.625
         Cancelled                                (47,300)         $1.383
         Expired                                  (99,740)         $4.479
                                             ------------
         Balance as of December 31, 2001          533,165          $1.845
                                             ============
</TABLE>



                                       41
<PAGE>

         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.

         Awards  may be granted  under the 1998 Plan with  respect to a total of
         5,000,000  shares of Common Stock.  As of December 31, 2001,  3,310,690
         options are outstanding,  of which 1,437,372 are vested, and a total of
         1,351,265 options are available for grant under the 1998 Plan.

         Option  activity  under the 1998 Plan for the two years ended  December
         31, 2001 was as follows:

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

          Granted                                            1,287,000                $0.917
          Exercised                                            (29,480)               $1.568
          Cancelled                                           (313,685)               $2.131
          Expired                                             (247,200)               $2.377
                                                        --------------
          Balance as of December 31, 2001                    3,310,690                $1.683
                                                        ==============
</TABLE>


         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.


                                       42
<PAGE>


<TABLE>
                                                                 Year ended December 31,
                                                   ----------------------------------------------------
                                                        2001              2000               1999
                                                   ---------------    --------------    ---------------
<S>      <C>                                          <C>               <C>                <C>
           Loss attributable to holders of
           common stock:
                   As reported                         $9,910,546        $9,231,994         $9,952,189
                   Pro forma                          $11,812,003       $10,277,777        $10,895,072
           Basic and diluted loss per share
              attributable to holders of
              common stock
                  As reported                               $0.44             $0.44              $0.59
                  Pro forma                                 $0.52             $0.49              $0.64
</TABLE>


         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, 1999,  2000 and 2001,  respectively:  dividend yield of 0%
         for all periods;  expected volatility of 92%, 100% and 100%;  risk-free
         interest  rate of 5.3%,  5.5% and 4.7%;  and expected term of 4.0 years
         for 1999 and 2000,  and 2001.  The  weighted-average  fair value of the
         options granted under all of the Company's plans during the years ended
         December  31,  1999,  2000  and  2001  was  $1.60,   $1.54  and  $0.74,
         respectively.  The  weighted  average  exercise  price  of the  options
         outstanding under all of the Company's plans at December 31, 1999, 2000
         and 2001 was $2.68, $2.31 and $1.70,  respectively.  As of December 31,
         2001, the weighted  average  remaining  contractual life of the options
         outstanding  under  all of the  Company's  plans is 7.9  years  and the
         number of options exercisable is 1,562,872.

         RESERVE FOR ISSUANCE

         At December 31, 2001, the Company has  authorized the following  shares
         of Common Stock for issuance upon  conversion of the Series C Preferred
         Stock,  Series D  Preferred  Stock,  and upon  exercise  of options and
         warrants:


         Series D Preferred Stock                                  3,675,000
         Common Stock options outstanding                          3,854,457
         Common Stock options available for grant                  2,138,087
         Common Stock warrants                                     1,776,365
                                                               -----------------
         Total shares of authorized Common Stock reserved         11,443,909
                                                               =================




                                       43
<PAGE>


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, 2001 are as follows:

                                                        Operating     Capital
                                                        ---------     -------

               2002                                      $576,590       $50,059
               2003                                       341,199             -
                                                        ---------     ---------

            Total minimum payments                       $917,789        50,059
                                                         ========
            Interest                                                     (2,255)
                                                                        --------

            Present value of capital lease obligations                   47,804
            Less:  current portion                                      (47,804)
                                                                      ----------

            Capital lease obligations non-current                   $          0
                                                                    ============

         Rent expense was $464,483,  $583,582,  and $919,550 for the years ended
         December 31, 2001, 2000 and 1999, respectively.

         At December 31, 2001, the Company expects to receive $142,716 in future
         minimum sublease rental income payments in 2002.


8.       EMPLOYEE 401(K) DEFERRED COMPENSATION PLAN

         The  Company has a 401(k)  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, 2001, 2000 or 1999.



                                       44
<PAGE>


9.       SUPPLEMENTAL CASH FLOW DISCLOSURE

         Selected cash payments and noncash activities were as follows:

<TABLE>
                                                                          Year ended December 31,
                                                        -------------------------------------------------------------
                                                              2001                  2000                  1999
                                                        -----------------     ------------------    -----------------
<S>                                                          <C>                      <C>                  <C>
         Cash paid for interest                              $   11,560               $ 21,982             $728,221
         Cash paid for dividends                             $      259               $     16                   -
         Noncash investing and financing
             activities:
         Dividends paid with stock                           $   46,064               $461,299                   -
         Deemed dividend on preferred stock                  $2,932,023                      -                   -
         Issuance of stock options to consultants            $   98,232               $ 95,422             $ 93,764
         Issuance of restricted stock                        $   52,000               $282,000                    -
         Collection and forgiveness of
             subscriptions  receivable                                -                      -             $ 46,236
</TABLE>


10.      NET LOSS PER SHARE

<TABLE>

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


                                                                              Year Ended December 31,
                                                                 --------------------------------------------------
                                                                     2001               2000              1999
                                                                 --------------------------------------------------
<S>                                                            <C>                <C>               <C>
         Numerator:
         Loss before extraordinary item                        $   (6,237,278 )   $   (8,862,015 )  $   (9,307,892 )
         Less:  Dividend on preferred stock                          (741,245 )         (369,979 )        (272,245 )
         Deemed dividend on preferred stock                        (2,932,023 )                -                 -
                                                                 -------------      -------------     -------------
         Net loss before extraordinary item                        (9,910,546 )       (9,231,994 )      (9,580,137 )
         Extraordinary item-early extinguishment of debt                    -                  -          (372,052 )
                                                                 -------------      -------------     -------------
         Net loss attributable to holders of Common Stock      $   (9,910,546 )   $   (9,231,994 )  $   (9,952,189 )
                                                                 =============      =============     =============
         Denominator:
         Denominator for basic net loss per share-weighted
             average shares                                        22,576,188         20,871,076        16,938,205

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

         Denominator for diluted net loss per share-adjusted
             weighted average shares                               22,576,188         20,871,076        16,938,205
                                                                 =============      =============     =============

         Basis and diluted loss per share:
         Loss before extraordinary item                        $        (0.44 )   $        (0.44 )  $        (0.57 )
         Extraordinary item-early extinguishments of debt                   -                  -             (0.02 )
                                                                 -------------      -------------     -------------
         Net loss attributable to holders of Common Stock      $        (0.44 )   $        (0.44 )  $        (0.59 )
                                                                 =============      =============     =============
</TABLE>

                                       45
<PAGE>

         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,
                           -----------------------------------------------------
                                  2001              2000            1999
                           ----------------------------------------------------

         Preferred stock:
              Series B                    -          1,287,554       1,287,554
              Series D            3,675,000                  -               -
         Stock options            3,854,457          2,851,212       2,515,833
         Warrants                 1,776,365          1,072,054       3,974,957


11.      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, 2000
         and 2001:
<TABLE>
                                    1ST QUARTER        2ND QUARTER        3RD QUARTER        4TH QUARTER
                                    -----------        -----------        -----------        -----------
                                    (restated)
<S>                             <C>                 <C>                <C>                <C>
        2001
        Revenue                 $        790,181    $       922,366    $     1,099,998    $     2,177,617
        Gross profit                     485,282            650,838            676,047          1,844,120
        Net loss                $       (993,215)   $    (2,321,670)   $    (2,148,562)   $      (773,831)
                                        =========        ===========        ===========          ========

        Net loss per share,     $          (0.18)   $         (0.11)   $         (0.10)   $         (0.04)
        basic and diluted                  ======             ======             ======             =====


        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 diluted             $          (0.09)   $         (0.12)   $         (0.12)   $         (0.10)
                                           ======             ======             ======             =====


         The  Company  restated  the  results  of the first  quarter  of 2001 to
         account for the  allocation of the fair market value to the  detachable
         warrants  issued in connection with the Series D Preferred  Stock.  The
         result of the restatement  was to record an additional  deemed dividend
         of $1,107,335  for the  beneficial  conversion  feature  related to the
         issuance of the warrants.
</TABLE>

                                       46
<PAGE>



                                V-ONE CORPORATION
                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

              For the years ended December 31, 1999, 2000 and 2001


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

  ALLOWANCE FOR
  DOUBTFUL ACCOUNTS
     December 31, 1999                   $    524,638       (220,912)          169,482          $    134,244
     December 31, 2000                   $    134,244         68,490            97,070          $    105,664
     December 31, 2001                   $    105,664            ---            33,629          $     72,035

  DEFERRED TAX ASSET
  VALUATION ALLOWANCE
     December 31, 1999                   $  9,448,764       5,410,464              ---          $ 14,859,228
     December 31, 2000                   $ 14,859,228       1,620,108              ---          $ 16,479,336
     December 31, 2001                   $ 16,479,336       2,397,885              ---          $ 18,877,221

  ALLOWANCE FOR
  NON-SALABLE INVENTORY
     December 31, 1999                   $    313,356             ---          225,662           $    87,694
     December 31, 2000                   $     87,694          32,699           41,737           $    78,656
     December 31, 2001                   $     78,656         120,000          169,063           $    29,593

</TABLE>



                                       47
<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 16, 2002.

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 16, 2002.

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
              16, 2002.

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 16, 2002.



                                     PART IV

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




                                       48
<PAGE>



(a)(1), (a)(2) and (d)  Financial Statements and Financial Statement Schedule.

See Index to Financial  Statements on page 26. All required financial statements
and financial  statement  schedules of the Company are set forth under Item 8 of
this Annual Report on Form 10-K.

(a)(3)  Exhibits
<TABLE>
NUMBER            DESCRIPTION
------            -----------
<S>               <C>
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 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)
10.20             Registration  Rights Agreement dated as of December 3, 1997 between V-ONE and Advantage Fund II Ltd. (2)


                                       49
<PAGE>

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)
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)


                                       50
<PAGE>

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 (14)
10.66             Form of Warrant Granted to Holders of Series D Convertible  Preferred  Stock,  dated February 14,
                  2001 (14)
10.67             2001 Employee Stock Purchase Plan (14)
10.68             Form of  Subscription  Agreement  between the Company and Employees under the 2001 Employee Stock
                  Purchase Plan (14)
10.69             Agreement for Purchase and Sale of Stock between the Company and NFR Security,  Inc., dated March
                  13, 2001 (14)
23.1              Consent of Ernst & Young LLP
</TABLE>

------------------------------
(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.

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

                                       51
<PAGE>

(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 10-K for the twelve months ended December 31, 2000.

(b)       Reports on Form 8-K

None.

                                       52
<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 28, 2002
                                      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.

<TABLE>
             SIGNATURE                            TITLE                                 DATE
<S>     <C>    <C>    <C>    <C>    <C>    <C>


                                        President, Chief Executive            March 28, 2002
/s/ Margaret E. Grayson                    Officer and Director
-------------------------------------
Margaret E. Grayson


                                         Chief Financial Officer,             March 28, 2002
/s/ John F. Nesline                      Treasurer and Controller
-------------------------------------
John F. Nesline


/s/ Molly G. Bayley                              Director                     March 28, 2002
-------------------------------------
Molly G. Bayley


/s/ Heidi B. Heiden                              Director                     March 28, 2002
-------------------------------------
Heidi B. Heiden


/s/ James T. McManus                             Director                     March 28, 2002
-------------------------------------
James T. McManus


/s/ Michael J. Mufson                            Director                     March 28, 2002
-------------------------------------
Michael J. Mufson


/s/ Michael D. O'Dell                            Director                     March 28, 2002
-------------------------------------
Michael D. O'Dell


/s/ William E. Odom                              Director                     March 28, 2002
-------------------------------------
William E. Odom
</TABLE>



                                       53