Xybernaut Announces Completion of Audit Committee Investigation, Board's Adoption of Recommendations
2005-04-19 20:46 ET - News Release
FAIRFAX, Va. -- (Business Wire) -- April 19, 2005
Actions Taken Include Removal of Certain Company Officers,
Appointment of Retired General William Tuttle as Interim Chairman and
CEO and Resignation of Grant Thornton LLP as Auditors
Xybernaut(R) Corporation (NASDAQ: XYBRE) announced today that its
previously disclosed Audit Committee Investigation had been completed
and reached the following determinations, among others:
1. The Company's Chairman and CEO, Edward G. Newman, improperly
used substantial Company funds for personal expenses and failed
properly to substantiate expenses charged to the Company.
2. Members of the CEO's family employed by the Company were hired
and evaluated/not evaluated in direct violation of the Company's
anti-nepotism policy and constituted a "protected class" of employees.
3. The employment of certain members of the CEO's family was not
disclosed in SEC filings as required by SEC disclosure regulations.
4. There has been a lack of adherence to effective disclosure
controls governing the Company's public disclosures and the issuance
of press releases.
5. Major transactions were entered into by certain members of
senior management in violation of Company internal controls. Certain
members of Senior management failed properly to advise the Board of
material financial conditions regarding major transactions.
6. Certain members of senior management failed to disclose to the
Audit Committee and the Board written correspondence by the Company's
former Chief Financial Officer outlining serious concerns over the
breakdown of internal controls; and
7. Edward G. Newman and Steven A. Newman affirmatively impeded the
Audit Committee's investigation in material respects.
In response to the Audit Committee's Report and Recommendations,
the Board today approved the following actions:
1. Edward G. Newman was removed as Chairman of the Board and Chief
Executive Officer of the Company, and from all other positions he
holds with any Company subsidiaries or affiliates.
2. Steven A. Newman was removed as President and Chief Operating
Officer of the Company, and Vice Chairman of the Board, and from all
other positions he holds with any Company subsidiaries or affiliates.
3. The Board formally requested the resignations of Edward G. and
Steven A. Newman as Directors of the Company, but neither individual
has agreed to resign from the Board at this time.
4. Retired General William Tuttle was appointed as the Company's
Interim Chairman of the Board and Chief Executive Officer, while a
search is conducted for new management.
5. The Board authorized the retention of financial experts to
assist the Board in maximizing shareholder value.
6. In an effort to promote the independence of the Company's
Board, three directors of the Company -- James J. Ralabate, Dr. Edwin
Vogt and Martin Weisberg, each of whom provides other services for the
Company -- offered to resign from the Board. The Board determined to
defer its acceptance of these offers upon an orderly transition to a
new Board.
The Company also announced that Grant Thornton LLP has resigned as
the Company's independent auditors. The Company received a letter from
Grant Thornton LLP on April 14, 2005, stating that Grant Thornton LLP
has concluded that, in its professional judgment, it can no longer
rely on management's representations and has resigned as the Company's
registered independent accounting firm. On April 8, 2005, the Company
advised investors and others that, based upon a letter the Company
received from Grant Thornton LLP on April 6, 2005, no reliance should
be placed upon certain of the Company's historical financial
statements, together with the related audit reports the Company
received from its outside auditors. In light of Grant Thornton LLP's
resignation, the Company advises investors and others to continue to
refrain from relying upon any of the Company's historical financial
statements, together with the related audit reports the Company
received from its outside auditors, Grant Thornton LLP.
The reports of Grant Thornton LLP on the Company's financial
statements for the 2002 and 2003 fiscal years did not contain an
adverse opinion or a disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope, or accounting principles. In
addition, in connection with the audits of the Company's financial
statements for fiscal years 2002 and 2003, and in the subsequent
interim periods, there were no disagreements between the Company and
Grant Thornton LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or
procedure which, if not resolved to the satisfaction of Grant Thornton
LLP, would have caused Grant Thornton LLP to make reference to the
matter in connection with its report.
However, as noted above, Grant Thornton LLP has now concluded
that, in its professional judgment, it can no longer rely on
management's representations. After Grant Thornton LLP was advised of
the results of the Audit Committee investigation, Grant Thornton LLP
advised the Audit Committee's counsel that certain members of senior
management failed to disclose facts material to the financial
statements and the weaknesses in the internal controls. The Audit
Committee has discussed the basis for Grant Thornton LLP's conclusion
with Grant Thornton LLP and has authorized Grant Thornton LLP to
respond fully to the inquiries of any successor accountant concerning
this subject. The Audit Committee has reviewed the Company's
disclosure in this press release and in the Company's related Form 8-K
with Grant Thornton LLP.
In light of Grant Thornton LLP's resignation as the Company's
independent auditor and the other matters discussed above, the Company
is unable to predict when new auditors will be selected and its Form
10-K will be filed.
About Xybernaut
Xybernaut Corporation is a leading provider of wearable/mobile
computing hardware, software and services, bringing communications and
full-function computing power in a hands-free design to people when
and where they need it. Headquartered in Fairfax, Virginia, Xybernaut
has offices and subsidiaries in Europe (Benelux, Germany, UK) and Asia
(Japan, China, Korea). Visit the Xybernaut Web site at
www.xybernaut.com. Product photos are also available directly from
Xybernaut.
Xybernaut and the Xybernaut logo are trademarks or registered
trademarks of Xybernaut Corporation in the USA and other countries.
All other brand and product names are or may be trademarks of, and are
used to identify products or services of, their respective owners.
This press release contains forward-looking statements within the
meaning of The Private Securities Litigation Reform Act of 1995 (the
"Act"). In particular, when used in the preceding discussion, the
words "plan," "confident that," "believe," "scheduled," "expect," or
"intend to," and similar conditional expressions are intended to
identify forward-looking statements within the meaning of the Act and
are subject to the safe harbor created by the Act. Such statements are
subject to certain risks and uncertainties and actual results could
differ materially from those expressed in any of the forward-looking
statements. Such risks and uncertainties include, but are not limited
to, market conditions, the availability of components and successful
production of the Company's products, general acceptance of the
Company's products and technologies, competitive factors, timing, and
other risks described in the Company's SEC reports and filings.
Contacts:
Xybernaut Corporation
Michael Binko, 703-631-6925
publicrelations@xybernaut.com |
