* Question? - What do you do when your auditors give you a "going concern rating" in three of the last four
years (like pricewaterhousecoopers gave XYBR in 1995, 1997, and 1998) ? answer - fire the accountant
like XYBR did in late 1999)
* of course you can expect "On going concerns" when you have to borrow $1.2mm on 12/16/99 (which you
pay back on 1/29/00) to show cash on the year-end balance sheet of $925k
Plus you now have to add the year 2000
Xybernaut Shares Decline 25% After Auditor's Warning
Fairfax, Virginia, March 17 (Bloomberg) -- Xybernaut Corp. shares fell 25 percent after its outside auditor warned of ``substantial doubt' about the wearable computer maker's ability to continue as a going concern because of continuing losses and need for more capital.
Shares of the Fairfax, Virginia-based company have increased more than 20-fold since September as the company announced a sale to Firestone Building Products Co. and said it was in talks with several ``world class' technology companies, including International Business Machines Corp., about joint projects.
The stock fell 5 7/16 to 16 9/16 in trading of 7.5 million shares, almost three times its three-month average daily trading volume. That values its 36.7 million shares at more than $600 million. They fell as low as 14 3/4 trading on electronic exchanges after the 4 p.m. New York close.
Grant Thornton LLP issued its caution about Xybernaut's future in a letter dated Feb. 25. The letter was filed by the company today with the Securities and Exchange Commission in its annual report. Grant Thornton was hired after the company fired its prior auditor, PricewaterhouseCoopers LLP on Sept. 13. That accounting firm issued a ``going concern' warning to the company last year.
'The company feels comfortable' with the fundraising done since year's end,' Xybernaut Controller Tom Davis said in an interview.
Grant Thornton cited Xybernaut's ``recurring losses from operations' and said the company, which has accumulated losses of $48 million, will need more cash to fund its operations.
The annual report also revealed funding arrangements for the $13 million Xybernaut raised so far this year, including shares sold for well below market price.
It sold 647,500 unregistered shares in January for $2.46 million, for an average price of $3.80 a share. That's less than half the $11.20 average weighted price for the 60.1 million shares traded in January, according to Bloomberg analytics.
Davis declined to give the dates or the market price of the free trading stock when the unregistered shares were sold.
Xybernaut also borrowed $3 million in January at 10 percent interest. The unidentified lenders received an added inducement: warrants to buy 302,500 shares of stock at 10 cents a share.
In January and February, the company received $7 million as it issued 1,867,700 shares at an average price of $3.79 to investors exercising warrants received in prior financings.
An additional $618,970 was raised from employees and consultants exercising stock options for 231,842 shares, at an average price of $2.67.
As the company reported in a press release earlier this week, its 1999 loss widened to $16.8 million, or 78 cents a share from $13.1 million, or 80 cents. Average shares outstanding increased to 23.8 million from 17.7 million.
Revenue increased to $3.3 million from $875,560.
Xybernaut had a ``negligible' backlog of orders on Dec. 31.
It said it holds 13 U.S. patents, with 12 more pending.
Mar/17/2000 17:47
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