UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
ANNUAL REPORT ON FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
COMMISSION FILE NUMBER 0-21013
XYBERNAUT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 54-1799851
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12701 FAIR LAKES CIRCLE
FAIRFAX, VA 22033
(Address of principal executive offices) (Zip Code)
(703) 631-6925
(Issuer's telephone number, including area code)
SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT: None
SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT: Common Stock,
$0.01 par value
Check whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act 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 ___
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-K contained in this form, and no disclosure will 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: ____
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes ___ No X
The aggregate market value of the Common Stock of the issuer, its only
class of voting stock, was $41,295,351, of which $39,307,083 was held by
non-affiliates, calculated on the basis of the closing sale price of such stock
on the National Association of Securities Dealers Automated Quotation System as
of June 28, 2002, the last business day of the registrant's most recently
completed second fiscal quarter. The market value of non-affiliates excludes
shares owned by all executive officers and directors (but includes shares owned
by their spouses) which should not be construed as indicating that all such
persons are affiliates.
The number of shares outstanding of the registrant's Common Stock as of
April 25, 2003 was 128,847,772.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
EXPLANATION FOR FILING OF ANNUAL REPORT ON FORM 10-K/A
The purpose of this Annual Report on Form 10-K/A for the fiscal year ended
December 31, 2002 of Xybernaut Corporation, a Delaware corporation (the
"Company"), is to include Part III, Items 10, 11, 12 and 13 and thereby
eliminate the incorporation by reference of the Part III information to the
Company's definitive proxy statement.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company's directors and executive officers are:
YEAR FIRST
ELECTED OR
NAME AGE CLASS APPOINTED POSITION
- ------------------------------------------ --- ----- ---------- -----------------------------------------
Marc Ginsberg 52 I 2003 Director
Kazuyuki Toyosato 56 I 1998 Executive Vice President and Director
Martin Eric Weisberg, Esq. (1)(2) 52 I 1997 Secretary and Director
Noritsugu Yamaoka 61 I 2003 Director
Eugene J. Amobi 58 II 1996 Vice President and Director
Phillip E. Pearce (2)(3) 74 II 1995 Director
Lt. Gen. Harry E. Soyster (Ret.) (1)(2)(3) 67 II 1995 Director
Dr. Edwin Vogt 70 II 1998 Director
James S. Gilmore III, Esq. 53 III 2002 Director
Edward G. Newman 59 III 1990 Chief Executive Officer and
Chairman of the Board of Directors
Steven A. Newman, M.D. (1)(2) 57 III 1995 President, Chief Operating Officer and
Vice Chairman of the Board of Directors
James J. Ralabate, Esq. 75 III 1995 Director
Thomas D. Davis 33 - - Senior Vice President and
Chief Financial Officer
M. Dewayne Adams 36 - - Senior Vice President and
Chief Strategy Officer
(1) Member of the Compensation Committee.
(2) Member of the Nominating Committee.
(3) Member of the Audit Committee.
Officers are appointed by and serve at the discretion of the Board of Directors.
The Company's Board of Directors is divided into three different classes. At
each annual meeting of stockholders, one class of directors will be elected for
a term of three years to succeed those directors in the class whose terms then
expire. All directors hold office until the third annual meeting of shareholders
following their election or until their successors are duly elected and
qualified.
CLASS I DIRECTORS
Marc Ginsberg has been a director of the Company since March 2003. Mr. Ginsberg
currently serves as CEO and Managing Director of Northstar Equity Group in
Washington, D.C., a global financial advisory and capital sourcing company, and
is President of Layalina Productions, an Arab language television production
company. Mr. Ginsberg was the U.S. Ambassador to Morocco, served as President
Clinton's Deputy Press Secretary for Foreign Affairs, was the Special Assistant
to the Secretary of State for White House Relations for the Carter
Administration, was Deputy Senior Advisor to the President for Middle East
Policy and was a Middle East foreign policy advisor to Senator Edward Kennedy.
Mr. Ginsberg has also served as Senior Partner and Chief Financial Officer at
Galland, Kharasch, Morse and Garfinkle and practiced international corporate law
in the U.S. and in the Middle East. Mr. Ginsberg speaks fluent French, Arabic
and Hebrew and holds a Bachelor of Arts degree from the American University (cum
laude), a Masters of Business Administration (candidate) degree from Georgetown
University and a Juris Doctorate from Georgetown University Law Center.
Kazuyuki Toyosato has been a director since 1998 and joined the Company in
October of 1996 as Executive Vice President of Asian Operations. Mr. Toyosato is
responsible for overseeing a key segment of the Company's operations in Asia.
Prior to joining the Company, Mr. Toyosato spent 27 years with Sony Corporation
in Japan where his last position was the Vice President of Sony USA.
2
He previously helped manage the Sony Walkman product line and Lithium battery
business, and managed Sony's 8mm video camcorder and peripherals product line.
Martin Eric Weisberg, Esq., who has been a director since 1997 and has served as
Secretary of the Company since that time, is a partner of the law firm, Jenkens
& Gilchrist Parker Chapin LLP, which serves as outside general counsel to the
Company. Mr. Weisberg specializes in the areas of securities, mergers and
acquisitions, financing and international transactions and has been in the
private practice of law for 27 years. Mr. Weisberg is a summa cum laude graduate
of Union College (B.A. 1972), where he was elected to Phi Beta Kappa. He
received his law degree from The Northwestern University School of Law (1975),
where he graduated summa cum laude, was Articles Editor of the Law Review and
was elected to the Order of the Coif. Mr. Weisberg also attended The London
School of Economics and Political Science. Mr. Weisberg serves as outside
general counsel to a number of public and private companies.
Noritsugu Yamaoka has been a director of the Company since March 2003. Mr.
Yamaoka currently serves as a senior advisor to IBM. Mr. Yamaoka worked at IBM
for over three decades, including as General Manager for IBM Technology Market
Development from 1994 through 2003. Mr. Yamaoka speaks fluent Japanese and
English, holds a Bachelor of Science degree in Electronics Communication from
Waseda University (Tokyo, Japan) and completed advanced degree coursework at
Syracuse University (SIS) and the University of Michigan (Business
Administration).
CLASS II DIRECTORS
Eugene J. Amobi, P.E. has been a Vice President of the Company since January
2000 and a director of the Company since January 1996. Since 1983, Mr. Amobi has
been President, a director and a principal stockholder of Tech International,
Inc. ("Tech International"), which provides engineering, technical support and
consulting services to government and domestic and international clients. Mr.
Amobi has been president and director of Tech International of Virginia Inc.
("Tech Virginia"), our wholly-owned subsidiary, since 1994. Mr. Amobi also has
been president of Tech Consultants Inc. since 1988. Prior to 1983, Mr. Amobi was
a Senior Engineer with E.I. DuPont de Nemours and a Managing Director of Stanley
Consultants, an international engineering consulting firm. Mr. Amobi is a
graduate of The Technion, Israel Institute of Technology (B.S. 1969), Princeton
University (M.S. 1970) and Syracuse University (M.B.A. 1973).
Phillip E. Pearce has been a director of the Company since October 1995. Mr.
Pearce has been an independent business consultant with Phil E. Pearce &
Associates, Chairman and Director of Financial Express Corporation since 1990
and since 1988 has been a principal of Pearce-Henry Capital Corp. Prior to 1988,
Mr. Pearce was Senior Vice President and a director of E.F. Hutton, Chairman of
the Board of Governors of the National Association of Securities Dealers, a
Governor of the New York Stock Exchange and a member of the Advisory Council to
the United States Securities and Exchange Commission on the Institutional Study
of the Stock Markets. Mr. Pearce also is a director of RX Medical Services,
Inc., an operator of medical diagnostic facilities and clinical laboratories,
InfoPower International, Inc., a software development company, and New York
International Commerce Group, Inc. Mr. Pearce is a graduate of the University of
South Carolina (B.A. 1953) and attended the Wharton School of Investment Banking
at the University of Pennsylvania.
Lt. Gen. Harry E. Soyster (Ret.) has been a director of the Company since
January 1995. From 1991 to present he has been employed by Military Professional
Resources, Incorporated currently as Director of Washington Operations and Vice
President of International Operations. From 1988 until his retirement in 1991,
Lieutenant General Soyster (Ret.) was the Director of the United States Defense
Intelligence Agency. Prior to that time, he was Commander of the United States
Army Intelligence and Security Command and a Deputy Assistant Chief of Staff for
Intelligence, Department of the Army. Lieutenant General Soyster (Ret.) is a
graduate of the United States Military Academy at West Point (B.S. 1957), Penn
State University (M.S. 1963), the University of Southern California (M.S. 1973)
and the National War College (1977).
Dr. Edwin Vogt has been a director of the Company since September 1998 and
currently serves as a consultant to the Company. From December 1998 to December
2002, Dr. Vogt served as a Senior Vice President to the Company and from 1996 to
1998, he served as a consultant to the Company. In 1996, Dr. Vogt was appointed
Director for the SBS association (Softwarezentrum Boblingen / Sindelfingen e.V.)
and directed the growth of this center to 39 member companies with over 200
experts, predominantly working in high-growth areas such as Internet, Workflow,
Process Automation and Multimedia. Dr. Vogt joined IBM in 1961 as Development
Programmer and worked in the fields of hardware development, holding 28 patents,
as well as software development. As manager, he was responsible for hardware
projects (IBM /360, /370, 433x) as well as various software projects (voice
recognition products) before being appointed Director as manager of several
Hardware and Software Product Development Laboratories. As IBM Software Group
Executive, Dr. Vogt held the worldwide responsibility for the development and
marketing of IBM Workflow products and Reengineering tools until retiring from
IBM at the end of 1995. Dr. Vogt is a graduate of the University of Stuttgart
with an M.S. in Electrical Engineering and Mathematics and a Ph.D. in
Theoretical Electrical Engineering.
3
CLASS III DIRECTORS
James S. Gilmore III, Esq. has been a director since April 2002. Mr. Gilmore
currently chairs the Congressional Advisory Panel to Assess Domestic Response
Capabilities for Terrorism Involving Weapons of Mass Destruction, a national
panel established by Congress in 1999 to assess federal, state, and local
governments' capability to respond to the consequences of a terrorist attack,
and is a partner with the law firm of Kelley, Drye & Warren LLP. Mr. Gilmore
served as the governor for the Commonwealth of Virginia from 1998 to 2002 and as
the attorney general from 1993 to 1997. During his tenure as governor, he
created the nation's first secretariat of technology, established a statewide
technology commission, and signed into law the nation's first comprehensive
state Internet policy. Mr. Gilmore is also a director of Barr Laboratories, Inc.
and IDT Solutions, a subsidiary of IDT Corporation. Mr. Gilmore is a graduate of
the University of Virginia (B.A. 1971) and the University of Virginia Law School
(J.D. 1977).
Edward G. Newman has been the Company's Chief Executive Officer and Chairman of
the Board of Directors since December 1994 and a director since 1990. Mr. Newman
served as our President from March 1993 to December 2002 and Treasurer from 1993
to 1994. From 1984 to 1992, Mr. Newman was President of ElectroTech
International Corporation, a software consulting firm. From 1973 to 1981, Mr.
Newman was employed by Xerox Corporation in several management positions in
office systems strategy, legal systems and international financial systems. Mr.
Newman served with the Central Intelligence Agency from 1966 to 1972. Mr. Newman
also has been an Executive Vice President of Tech International since 1990 and a
director and Chief Executive Officer of Tech Virginia since 1994. Mr. Newman is
a graduate of the University of Maryland (B.A. 1971) and the University of New
Haven (M.B.A. 1984). Mr. Newman is the brother of Steven A. Newman, M.D., the
President, Chief Operating Officer and Vice Chairman of the Board of Directors
of the Company.
Steven A. Newman, M.D. has been the Company's President and Chief Operating
Officer since January 2003, the Vice Chairman of the Board of Directors since
August 1997 and a director since January 1995. Dr. Newman was an Executive Vice
President of the Company from January 2000 to December 2003, an Executive Vice
President and Secretary from December 1994 to October 1995 and a consultant of
the Company between January 1996 and December 1999. Dr. Newman was President and
Chief Executive Officer of Fed American, Inc., a mortgage banking firm, from
1988 to 1991. Dr. Newman has been a director of Tech Virginia since 1994. Dr.
Newman is a graduate of Brooklyn College (B.A. 1967) and the University of
Rochester (M.D. 1972). Dr. Newman is the brother of Edward G. Newman, the Chief
Executive Officer and Chairman of the Board of Directors of the Company.
James J. Ralabate, Esq. has been a director of the Company since January 1995.
Mr. Ralabate has been in the private practice of patent law since 1982. Prior to
that time, Mr. Ralabate was General Patent Counsel for Xerox Corporation,
responsible for worldwide patent licensing and litigation, and an Examiner in
the United States Patent Office. Mr. Ralabate is our intellectual property
counsel and is a graduate of Canisius College (B.S. 1950) and The American
University (J.D. 1959).
COMPENSATION OF DIRECTORS
The Company currently does not pay or accrue salaries or consulting fees to
outside directors for each board or committee meeting attended. It is the
Company's intention to establish such payments eventually but does not do so
currently. Any payments when implemented will be comparable to those made by
companies of similar size and stage. Directors receive a grant of options for
50,000 shares of Common Stock upon election and reelection to the Board of
Directors and are entitled for each full year of service (other than the year of
election or reelection), commencing with those directors who were elected at the
1997 Annual Meeting, to receive a grant of options to purchase 10,000 shares of
Common Stock which vests at the end of such year of service. Members of the
Audit, Compensation and Nominating Committees are entitled to receive $1,000 for
each Audit or Compensation Committee meeting attended by such member. The
Company also has adopted various stock incentive plans, in which the directors
are eligible to participate. See "Executive Compensation - Compensation Plans."
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and executive officers, and persons who own more than 10% of
the Company's Common Stock, to file with the Securities and Exchange Commission
(the "SEC") initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors and
greater than 10% shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) reports they file. Based solely on the
Company's review of the copies of such reports by it, the Company believes that
during fiscal 2002 all such filings were made except that Phillip Pearce, Steven
A. Newman, James J. Ralabate, M. Dewayne Adams, Eugene Amobi, Martin Eric
Weisberg, Edward G. Newman, Edwin Vogt, Harry E. Soyster and Kazuyuki Toyosato
failed to timely file a Statement of Changes in Beneficial Ownership on Form 4
and James S. Gilmore, III failed to timely file an Initial Statement of
Beneficial Ownership on Form 3. These Section 16(a) filing requirements have
been made by each of the aforementioned individuals.
4
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following sets forth the annual and long-term
compensation for services in all capacities to the Company for the fiscal years
ended December 31, 2002, 2001 and 2000 paid to the Company's Chief Executive
Officer ("CEO") and the registrant's other three executive officers other than
the CEO who were serving as executive officers at the end of the last completed
fiscal year.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
------------
Awards
------------
Annual Compensation Common Stock
------------------------------------------------ Underlying
Name and Principal Position Year Salary Bonus Options All Other
- --------------------------------------------- -------- ----------------- ------------ ------------ ----------------
Edward G. Newman 2002 $ 254,917 (1) $ 0 35,000 $ 68,246 (3)
Chief Executive Officer and 2001 $ 275,440 (1) $ 0 240,384 $ 89,825 (3)
Chairman of the Board of Directors 2000 $ 263,476 (1) $ 50,000 (2) 50,000 $ 76,211 (3)
Dr. Steven A. Newman 2002 $ 229,425 (4) $ 0 35,000 $ 75,651 (3)
President, Chief Operating Officer and 2001 $ 248,907 (4) $ 0 540,384 $ 82,064 (3)
Vice Chairman of the Board of Directors 2000 $ 240,351 $ 150,000 (5) 50,000 $ 22,122 (3)
Thomas D. Davis 2002 $ 115,500 (6) $ 6,666 (7) 180,000 $ 0
Senior Vice President and 2001 $ 98,400 $ 0 0 $ 0
Chief Financial Officer 2000 $ 100,030 $ 0 0 $ 0
M. Dewayne Adams 2002 $ 160,417 (8) $ 0 55,406 $ 4,207 (3)
Senior Vice President and 2001 $ 169,792 $ 0 0 $ 4,207 (3)
Chief Strategy Officer 2000 $ 47,822 (9) $ 0 50,000 $ 0
(1) Includes $10,107 and $13,476 paid by Tech Virginia in 2001 and 2000,
respectively. Compensation does not include (i) $76,650, $84,886 and $74,110
paid to Frances C. Newman, the wife of the executive, in 2002, 2001 and 2000,
respectively, prior to her resignation from the Company in October 2002, (ii)
$13,864 in salary earned by the executive in 2002 that was deferred and paid in
2003 or (iii) $11,084 in salary earned by the executive but not paid in 2002
that may be paid in 2003.
(2) Represents payment of a signing bonus as an incentive for the executive to
enter into his employment agreement.
(3) Includes payment of (i) non-accountable expense and transportation
allowances, (ii) unused vacation payouts and/or (iii) other miscellaneous
compensation.
(4) Includes $10,107 and $13,476 paid by Tech Virginia in 2001 and 2000,
respectively. Does not include (i) $12,478 in salary earned in 2002 that was
deferred and paid in 2003 or (ii) $9,975 in salary earned but not paid in 2002
that may be paid in 2003.
(5) Represents payment of a $50,000 signing bonus as an incentive for the
executive to enter into his employment agreement and a $100,000 annual bonus for
services performed during 2000.
(6) Does not include $5,000 in salary earned but not paid in 2002 that may be
paid in 2003.
(7) Represents partial payment of a signing bonus as an incentive for the
executive to enter into his employment agreement. The remaining signing bonus
balance of $3,334 is expected to be paid in 2003.
(8) Does not include $16,406 in salary earned but not paid in 2002 that may be
paid in 2003. As consideration for nonpayment of this salary, the Company
granted the executive 16,406 options to purchase Common Stock and is obligated
to grant to the executive 44,341 shares of Common Stock in August 2003.
(9) The executive joined the Company in July 2000.
OPTION GRANTS TABLE. The following table sets forth information on grants of
stock options during fiscal 2002 to executive officers and directors of the
Company. All such options are exercisable to purchase shares of Common Stock. No
stock appreciation rights ("SARs") were granted during such period to such
persons.
5
Options Percent of Total Potential
Granted Options Granted to Exercise or Base Realizable
(Shares) Employees in Year Price ($/Share) Expiration Date Value (1)
-------- ------------------ ---------------- --------------- ----------
M. Dewayne Adams 24,000 1.4300% $0.83 June 25, 2012 $ 19,271
16,406 0.9775% $0.37 August 16, 2012 $ 5,873
15,000 0.8938% $0.24 October 25, 2012 $ 3,483
Eugene J. Amobi 10,000 0.5958% $2.21 January 16, 2012 $ 21,380
15,000 0.8938% $0.24 October 25, 2012 $ 3,483
50,000 2.9792% $0.61 December 17, 2012 $ 29,507
Thomas D. Davis 15,000 0.8938% $2.07 January 31, 2012 $ 30,039
15,000 0.8938% $0.24 October 25, 2012 $ 3,483
150,000 8.9376% $0.31 November 1, 2012 $ 44,986
James S. Gilmore III, Esq. 50,000 2.9792% $1.43 April 10, 2012 $ 69,172
10,000 0.5958% $0.61 December 17, 2012 $ 5,901
Marc Ginsberg 0 - - - -
Edward G. Newman 10,000 0.5958% $2.21 January 16, 2012 $ 21,380
15,000 0.8938% $0.24 October 25, 2012 $ 3,483
10,000 0.5958% $0.61 December 17, 2012 $ 5,901
Steven A. Newman, M.D. 10,000 0.5958% $2.21 January 16, 2012 $ 21,380
15,000 0.8938% $0.24 October 25, 2012 $ 3,483
10,000 0.5958% $0.61 December 17, 2012 $ 5,901
Phillip E. Pearce 10,000 0.5958% $2.21 January 16, 2012 $ 21,380
50,000 2.9792% $0.61 December 17, 2012 $ 29,507
James J. Ralabate, Esq. 10,000 0.5958% $2.21 January 16, 2012 $ 21,380
10,000 0.5958% $0.61 December 17, 2012 $ 5,901
Lt. Gen Harry E. Soyster (Ret.) 10,000 0.5958% $2.21 January 16, 2012 $ 21,380
50,000 2.9792% $0.61 December 17, 2012 $ 29,507
Kazuyuki Toyosato 50,000 2.9792% $2.21 January 16, 2012 $106,902
15,000 0.8938% $0.24 October 25, 2012 $ 3,483
10,000 0.5958% $0.61 December 17, 2012 $ 5,901
Dr. Edwin Vogt 10,000 0.5958% $2.21 January 16, 2012 $ 21,380
15,000 0.8938% $0.24 October 25, 2012 $ 3,483
50,000 2.9792% $0.61 December 17, 2012 $ 29,507
Martin Eric Weisberg, Esq. 50,000 2.9792% $2.21 January 16, 2012 $106,902
10,000 0.5958% $0.61 December 17, 2012 $ 5,901
Noritsugu Yamaoka 0 - - - -
(1) The potential realizable value was calculated using the Black-Sholes
option-pricing model. The variables used in the model were as follows: i) the
risk free rate was 3.03%, which was the yield of 5-year Treasury Notes issued
November 15, 2002, and ii) the standard deviation of stock return was 131.25%,
which was the volatility of the Company's stock calculated using the end of the
month stock price for the period from January 1, 2000 through December 31, 2002.
FISCAL YEAR-END OPTIONS/OPTION VALUES TABLE.
Number of Securities Underlying Value of Unexercised In-The-Money
Unexercised Options at Fiscal Options at Fiscal Year-End ($)
Year End
Exercisable Unexercisable Exercisable Unexercisable
-------------------------------------- ---------------------------------------
M. Dewayne Adams 61,406 44,000 $ 3,647 $ 2,700
Eugene J. Amobi 355,000 110,000 $ 1,350 $ 2,700
Thomas D. Davis 89,709 143,000 $11,350 $22,700
James S. Gilmore III, Esq. 0 60,000 $ 0 $ 0
Marc Ginsberg 0 0 $ 0 $ 0
Edward G. Newman (1) 0 0 $ 0 $ 0
Steven A. Newman, M.D. 1,107,134 30,000 $ 1,350 $ 2,700
Phillip E. Pearce 115,000 60,000 $ 0 $ 0
James J. Ralabate, Esq. 172,500 32,500 $ 0 $ 0
Lt. Gen Harry E. Soyster (Ret.) 140,000 60,000 $ 0 $ 0
Kazuyuki Toyosato 145,000 110,000 $ 1,350 $ 2,700
Dr. Edwin Vogt 160,000 110,000 $ 1,350 $ 2,700
Martin Eric Weisberg, Esq. 117,500 72,500 $ 0 $ 0
Noritsugu Yamaoka 0 0 $ 0 $ 0
(1) On December 17, 2002, all of the officer's 742,049 options were canceled as
partial repayment of a promissory note owed by the officer to the Company (see
"Certain Relationships and Related Transactions - Other Related Transactions."
The Company has no retirement, pension or profit sharing program for the benefit
of its directors, officers or other employees, but the Board of Directors may
recommend one or more such programs for adoption in the future.
6
EMPLOYMENT AGREEMENTS
Mr. Edward G. Newman entered into a two-year employment agreement effective as
of January 1, 2003, and expiring on December 31, 2004, as the Company's Chairman
and Chief Executive Officer. The position of President of the Company, which was
previously held by Mr. Newman, is being assumed by Dr. Steven A. Newman. The
employment agreement provides for a salary of $300,000. Under the agreement, the
Company will provide for a $2 million life insurance policy on Mr. Newman's life
payable to his designated beneficiaries and he will receive a car allowance in
the amount of $1,200 per month. The agreement provides the executive with the
same general benefits as the Company provides to its other senior executive
officers as a group, including health care insurance, participation in benefit
plans, and six weeks vacation. Based solely upon the Company's financial
performance during the employment term, Mr. Newman may receive, as a performance
bonus, an annual grant of stock options (or, at Mr. Newman's request, shares of
common stock) in an amount equal to the greater of: (i) 2% of the excess over
the Company's revenue goal for each fiscal year, if the revenue goal is
attained, and (ii) 5% of the excess over the Company's net profit goal for each
fiscal year, if the net profit goal is attained ((i) and (ii) together, the
"Performance Options"), with a limit on such grant of 4% of the Company's then
outstanding shares of common stock in any given fiscal year during the term of
the agreement. The Performance Options are exercisable at a price equal to the
average of the closing price of the Common Stock for 30 days prior to the end of
the applicable fiscal year. As an incentive to enter into this agreement, Mr.
Newman received a grant of 300,000 options vesting in equal installments on each
of December 31, 2003 and December 31, 2004.
Dr. Steven A. Newman entered into a two-year employment agreement effective as
of January 1, 2003, and expiring on December 31, 2004, assuming the position of
President and Chief Operating Officer of the Company. Mr. Newman previously held
the position of Executive Vice President and remains the Vice Chairman of the
Company's Board of Directors. The employment agreement provides for a salary of
$300,000. The agreement provides the executive with the same general benefits as
the Company provides to its other senior executive officers as a group,
including health care insurance, participation in benefit plans, and six weeks
vacation, and a car allowance in the amount of $1,000 per month. Based solely
upon the Company's financial performance during the employment term, Mr. Newman
may receive Performance Options on the same basis as are applicable to Mr.
Edward G. Newman as described above, with a limit on such grant of 4% of the
Company's then outstanding shares of common stock in any given fiscal year
during the term of the agreement. The Performance Options are exercisable at a
price equal to the average of the closing price of the Common Stock for 30 days
prior to the end of the applicable fiscal year. As an incentive to enter into
this agreement, Mr. Newman received a grant of 250,000 options vesting in equal
installments on each of December 31, 2003 and December 31, 2004.
Thomas D. Davis is employed pursuant to a 26-month employment agreement expiring
on December 31, 2004. This agreement calls for an initial salary of $150,000
with annual increases at the CPI percentage plus three percent; bonuses, payable
at the sole discretion of the Board of Directors in cash, shares of Common
Stock, options to purchase shares of Common Stock, or any combination thereof,
in an amount to be determined by the Board of Directors; a $500,000 life
insurance policy payable to his designated beneficiaries; and benefits which the
Company may provide to its executive officers, including health care insurance
and vacation. Mr. Davis is eligible to participate in bonus or other programs
that were established subsequent to the date he entered into his employment
agreement. As an incentive to enter into this agreement, Mr. Davis received a
signing bonus of $10,000, of which amount $6,666 was paid during 2002 and the
remaining $3,334 is expected to be paid during 2003, and a grant of 150,000
options, which vests in three equal installments on November 1, 2002, 2003 and
2004.
Kazuyuki Toyosato is employed pursuant to a two-year employment agreement
expiring on September 21, 2003. Pursuant to this employment agreement, Mr.
Toyosato receives an annual base salary of $190,000 and is eligible to receive
bonuses of $40,000 to $60,000 annually, contingent upon completion of
performance objectives.
Dr. Edwin Vogt was employed with the Company pursuant to a five-year employment
agreement expiring on December 31, 2004, pursuant to which Dr. Vogt received an
annual base salary of $150,000. Effective January 1, 2003, Dr. Vogt entered into
a consulting agreement with the Company through which he resigned his position
as an employee of the Company. Pursuant to the terms of the consulting
agreement, Dr. Vogt will receive consulting fees totaling Euro 20,000 for the
quarter ended March 31, 2003 and Euro 10,000 for each subsequent calendar
quarter. Dr. Vogt is also eligible to receive commissions in a manner and amount
to be determined in the future. Either the Company or Dr. Vogt can terminate the
consulting agreement within 30 days of the end of each calendar quarter.
Eugene J. Amobi is employed pursuant to a three-year employment agreement
expiring on December 31, 2002. This agreement provides for an annual base salary
of $140,000 and an annual discretionary bonus to be determined by the Company
for each full year of employment with the Company based upon the performance of
Mr. Amobi during such year as well as the Company's overall performance during
such year. As an incentive to enter into this agreement, Mr. Amobi was granted
the right to purchase 150,000 shares of Common Stock, which right will vest over
a period of three years in increments of 50,000 shares per year on December 31
of each year beginning December 31, 2000 through December 31, 2002. This
agreement provides Mr. Amobi with benefits which the Company may provide to its
executive officers, including health care insurance, automobile allowance and
vacation.
7
COMPENSATION PLANS
The Company has currently in effect the following compensation plans: the 1996
Omnibus Stock Incentive Plan, the 1997 Stock Incentive Plan, the 1999 Stock
Incentive Plan, the 2000 Stock Incentive Plan and the 2002 Stock Incentive Plan
(collectively, the "Incentive Plans"). The Incentive Plans provide for the
granting of incentive stock options ("Incentive Stock Options") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), nonqualified stock options, stock appreciation rights ("SARs") and
grants of shares of Common Stock subject to certain restrictions ("Restricted
Stock") to officers, directors, employees and others. The Incentive Stock
Options, nonqualified stock options, SARs and Restricted Stock shall be
collectively referred to herein as the "Awards." Incentive Stock Options can be
awarded only to employees of the Company at the time of the grant.
The Incentive Plans are administered by the Compensation Committee of the Board
of Directors (subject to the authority of the full Board of Directors), which
determines the terms and conditions of the Awards granted under the Incentive
Plans, including the exercise price, number of shares subject to the option and
the exercisability thereof. Dr. Steven A. Newman, Lt. Gen. Harry E. Soyster
(Ret.) and Martin Eric Weisberg, Esq. currently are the members of the
Compensation Committee.
The exercise price of all Incentive Stock Options granted under the Incentive
Plans must equal at least the fair market value of the Common Stock on the date
of grant. In the case of an optionee who owns stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company
("Substantial Stockholders"), the exercise price of Incentive Stock Options must
be at least 110% of the fair market value of the Common Stock on the date of
grant. The exercise price of all nonqualified stock options granted under the
Incentive Plans shall be determined by the Compensation Committee. The term of
any Incentive Stock Option granted under the Incentive Plans may not exceed ten
years, or, for Incentive Stock Options granted to Substantial Stockholders, five
years. The Incentive Plans may be amended or terminated by the Board of
Directors, but no such action may impair the rights of a participant under a
previously granted option.
The Incentive Plans provide the Board of Directors or the Compensation Committee
the discretion to determine when options granted thereunder shall become
exercisable and the vesting period of such options. Upon termination of a
participant's employment or relationship with the Company, options may be
exercised only to the extent exercisable on the date of such termination (within
three months), but not thereafter, unless termination is due to death or
disability, in which case the options are exercisable within one year of
termination.
The Incentive Plans provide the Compensation Committee discretion to grant SARs
to key employees, consultants and directors. Promptly after the exercise of an
SAR, the holder shall be entitled to receive in cash, by check or in shares of
Common Stock, an amount equal to the excess of the fair market value on the
exercise date of the shares of Common Stock as to which the SAR is exercised
over the base price of such shares, which shall be determined by the
Compensation Committee.
The Incentive Plans also provide the Compensation Committee discretion to grant
to key persons shares of Restricted Stock subject to certain contingencies and
restrictions as the Compensation Committee may determine.
Furthermore, the 1996 Omnibus Stock Incentive Plan provides that upon a change
in control of the Company, all previously granted options and SARs immediately
shall become exercisable in full and all Restricted Stock immediately shall vest
and any applicable restrictions shall lapse. The 1996 Omnibus Stock Incentive
Plan defines a change of control as the consummation of a tender offer for 25%
or more of the outstanding voting securities of the Company, a merger or
consolidation of the Company into another corporation less than 75% of the
outstanding voting securities of which are owned in aggregate by the
stockholders of the Company immediately prior to the merger or consolidation,
the sale of substantially all of the Company's assets other than to a
wholly-owned subsidiary, or the acquisition by any person, business or entity
other than by reason of inheritance of over 25% of the Company's outstanding
voting securities. The change of control provisions of the 1996 Omnibus Stock
Incentive Plan may operate as a material disincentive or impediment to the
consummation of any transaction which could result in a change of control.
As of December 31, 2002, a total of 7,156,367 options had been issued and were
outstanding pursuant to the Incentive Plans. Each of the outstanding options has
an exercise price at least equal to the fair market value of the Common Stock on
the date of grant. As of December 31, 2002, there were no SARs outstanding and
there have been grants of Restricted Stock totaling 485,298 shares of Common
Stock.
EQUITY COMPENSATION PLAN INFORMATION
The table below sets forth certain information as of the Company's
fiscal year ended December 31, 2002 regarding the shares of the Company's common
stock available for grant or granted under stock option plans that were adopted
by the Company's stockholders. The Company has no stock option plan that was not
adopted by the Company's stockholders.
8
Number of securities remaining
available for future issuance
Number of securities Weighted-average under equity compensation
to be issued upon exercise exercise price of plans (excluding securities in
of outstanding options outstanding options the first column of this table)
---------------------- ------------------- -------------------------------
Equity Compensation plans approved
by security holders 7,156,367 $3.13 2,900,880
Equity Compensation plans not approved by n/a n/a n/a
security holders
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee participate in all deliberations
concerning executive compensation. The Compensation Committee consists of Lt.
Gen. Harry E. Soyster (Ret.), Dr. Steven A. Newman and Martin Eric Weisberg,
Esq. No executive officer of the Company serves as a member of the board of
directors or compensation committee of another entity, which has one or more
executive officers who serve as a member of the Company's Board of Directors or
Compensation Committee.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of April 24, 2003, certain information
regarding the ownership of voting securities of the Company by each stockholder
known to the management of the Company to be (i) the beneficial owner of more
than 5% of the Company's outstanding Common Stock, (ii) the directors during the
last fiscal year and nominees for director of the Company, (iii) the executive
officers named in the Summary Compensation Table herein under "Executive
Compensation" and (iv) all executive officers and directors as a group. The
Company believes that the beneficial owners of the Common Stock listed below,
based on information furnished by such owners, have sole investment and voting
power with respect to such shares.
Amount of Shares Percentage
Name Beneficially Owned Owned
- ---- ------------------ -----
M. Dewayne Adams 66,406 (1) *
12701 Fair Lakes Circle
Fairfax, Virginia 22033
Eugene J. Amobi 660,000 (2) *
12701 Fair Lakes Circle
Fairfax, Virginia 22033
Thomas D. Davis 100,609 (3) *
12701 Fair Lakes Circle
Fairfax, Virginia 22033
James S. Gilmore III, Esq. 50,000 (4) *
12701 Fair Lakes Circle
Fairfax, Virginia 22033
Marc Ginsberg 0 *
12701 Fair Lakes Circle
Fairfax, Virginia 22033
Edward G. Newman 1,931,995 (5) 1.5%
12701 Fair Lakes Circle
Fairfax, Virginia 22033
9
Steven A. Newman, M.D. 1,581,115 (6) 1.2%
12701 Fair Lakes Circle
Fairfax, Virginia 22033
Phillip E. Pearce 125,000 (7) *
12701 Fair Lakes Circle
Fairfax, Virginia 22033
James J. Ralabate, Esq 363,726 (8) *
5792 Main Street
Williamsville, New York 14221
Lt. Gen. Harry E. Soyster (Ret.) 169,364 (9) *
12701 Fair Lakes Circle
Fairfax, Virginia 22033
Kazuyuki Toyosato 200,000 (10) *
12701 Fair Lakes Circle
Fairfax, Virginia 22033
Dr. Edwin Vogt 182,500 (11) *
12701 Fair Lakes Circle
Fairfax, Virginia 22033
Martin Eric Weisberg, Esq. 207,000 (12) *
405 Lexington Avenue
New York, New York 10174
Noritsugu Yamaoka 0 *
12701 Fair Lakes Circle
Fairfax, Virginia 22033
All officers and directors as a group
(14 persons) 5,637,715 (13) 4.3%
- ----------
* Less than 1%
(1) Includes 66,406 shares of Common Stock issuable upon exercise of currently
exercisable options.
(2) Includes 370,000 shares of Common Stock issuable upon exercise of currently
exercisable options.
(3) Includes 99,709 shares of Common Stock issuable upon exercise of currently
exercisable options.
(4) Includes 50,000 shares of Common Stock issuable upon exercise of currently
exercisable options.
(5) Includes (a) 761,950 shares of Common Stock beneficially owned by Mr.
Newman's wife, Frances C. Newman, (b) 200,000 shares beneficially owned by an
irrevocable trust established by Mr. Newman for the benefit of his children, (c)
28,900 shares beneficially owned by an irrevocable trust established by Mr.
Newman for the benefit of his sister, (d) 28,900 shares beneficially owned by an
irrevocable trust established by Mr. Newman for the benefit of his mother, (e)
9,000 shares owned by an irrevocable trust established by Dr. Steven A. Newman
for which Mr. Newman is trustee and (f) 1,765 shares beneficially owned by Mr.
Newman and Frances C. Newman as joint tenants. Mr. Newman disclaims beneficial
ownership of all securities included in (a), (b), (c) and (d) above and this
disclosure shall not be deemed an admission that Mr. Newman is the beneficial
owner of these securities for purposes of Section 16 or for any other purpose.
(6) Includes (a) 1,122,134 shares of Common Stock issuable upon exercise of
currently exercisable options and (b) 100,000 shares beneficially owned by an
irrevocable trust established by Dr. Newman for the benefit of his children, for
which shares Dr. Newman disclaims beneficial ownership.
(7) Includes 125,000 shares of Common Stock issuable upon exercise of currently
exercisable options.
10
(8) Includes 195,000 shares of Common Stock issuable upon exercise of currently
exercisable options.
(9) Includes 150,000 shares of Common Stock issuable upon exercise of currently
exercisable options.
(10) Includes 200,000 shares of Common Stock issuable upon exercise of currently
exercisable options.
(11) Includes 182,500 shares of Common Stock issuable upon exercise of currently
exercisable options.
(12) Includes (a) 180,000 shares of Common Stock issuable upon exercise of
currently exercisable options, (b) 18,000 shares beneficially owned by Mr.
Weisberg's children and (c) 9,000 shares beneficially owned by Mr. Weisberg's
wife. Mr. Weisberg disclaims beneficial ownership of all shares owned by his
wife and children.
(13) Includes 2,740,749 shares of Common Stock issuable to the group upon
exercise of currently exercisable options.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the transactions described below, the Company did not secure
an independent determination of the fairness and reasonableness of such
transactions and arrangements with affiliates of the Company. In each instance
described below, the disinterested directors (either at or following the time of
the transaction) reviewed and approved the fairness and reasonableness of the
terms of the transaction. The Company believes that each transaction was fair
and reasonable to the Company and on terms at least as favorable as could have
been obtained from non-affiliates. Transactions between any corporation and its
officers and directors are subject to inherent conflicts of interest.
LEGAL SERVICES
The Company uses James J. Ralabate, Esq., a member of its Board of Directors, as
its patent counsel. The Company had expenditures of $331,112, $421,333 and
$174,468 during 2002, 2001 and 2000, respectively, in legal services payable to
this director. These amounts represent gross payments made by the Company and
the counsel is responsible for all overhead, professional, administrative and
other expenditures incurred by his law firm. The law firm bills the Company in
accordance with its established standard billing rates used in the past with its
other clients. During 2002 and 2001, the Company represented the law firm's only
significant client. During approximately half of 2002 and all of 2001 and 2000,
the director also serves as the Company's processing agent for payments made to
various other domestic and international law firms and agencies used to file and
maintain patents and trademarks. The director is paid only the amount that is
passed through to these other law firms and agencies and pays administrative
services related to these services. The Company made additional payments of
$274,040, $485,827 and $266,026 during 2002, 2001 and 2000, respectively, to
this director's law firm related to services rendered by the director's law firm
as the Company's processing agent for all foreign patent and trademark filing
and prosecution expenses. The Company's management believes that the
relationship with this law firm is based on arms-length terms and conditions.
The Company uses a law firm, in which Martin Eric Weisberg, Esq., its Secretary
and member of its Board of Directors is a partner, for services related to
financings, litigation, SEC filings and other general legal matters. The Company
had expenditures of $464,067, $392,524 and $446,320 during 2002, 2001 and 2000,
respectively, in legal services payable to this law firm. The law firm bills the
Company in accordance with the established billing rates used with its other
clients. As a result, the Company's management believes that the relationship
with this law firm is based on arms-length terms and conditions.
OTHER RELATED TRANSACTIONS
During 2000, Xybernaut GmbH used a company to provide configuration and
technical support services and a separate company to act as a distributor of the
Company's hardware products. The executive officers of these two companies are
the son and daughter-in-law of Edwin Vogt, a current consultant and member of
the Board of Directors of the Company and a former Senior Vice President. During
2000, the Company incurred expenses related to the technical support services
totaling $180,456 and recognized revenue related to distribution sales of its
hardware products totaling $313,843. During 2000, the Company terminated its
relationship with these two companies and established a reserve of $108,856
against the accounts receivable balance owed by one of the companies. This
balance was written off in 2001. The company providing configuration and
technical support services billed the Company using the established billing
rates used with its other clients. Additionally, management periodically
compared these billings against charges it would incur if these services were
provided by a different provider. The agreement with the distributor was reached
with similar terms and conditions provided to other resellers of the Company's
products. As a result, the Company's management believes that the relationship
with these companies was based on arms-length terms and conditions.
11
Between November 2000 and February 2001, the Company loaned a net balance of
$940,188 to Edward G. Newman, the Company's former President and current Chief
Executive Officer and Chairman of the Board of Directors. The proceeds were used
to prevent a forced sale of a portion of this officer's personal common stock
holdings of the Company that secured a personal margin loan from an investment
bank. The loan was made pursuant to a promissory note that was secured by shares
of the officer's personal common stock holdings of the Company and accrued
interest at 8% per year. On December 31, 2001, the Company's Board of Directors
increased the number of shares securing the loan from 200,000 shares to 250,000
shares, extended the maturity date from December 31, 2001 to December 31, 2002
and reduced the interest rate to 6%, reflective of a general decline in interest
rates over this period. On December 17, 2002, the $1,086,891 in outstanding
principal and interest was repaid in full through the i) transfer by the officer
to the Company of 1,108,343 shares of the Company's common stock personally held
by the officer, which amount includes the shares that were pledged as
collateral, which were valued at $681,631,and ii) cancellation of all of the
officer's 742,049 options to purchase shares of the Company's common stock that
had been granted prior to the date of repayment, which were valued at $405,260.
Effective December 31, 2002, the Company cancelled the 1,108,343 shares of
common stock transferred through this repayment. To determine the fair market
value of the transfer of shares of stock and the cancellation of stock options,
the Company used the market price of the Company's common stock on the date of
repayment and the Black-Scholes option-pricing model, respectively. The
outstanding principal and interest owed by the officer to the Company under this
promissory note totaled $0 and $1,026,708 at December 31, 2002 and 2001,
respectively.
PART IV
ITEM 16. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Exhibit Description
- ------- --------------
10.49 Form of Employment Agreement between the Company and Edward G. Newman
10.50 Form of Employment Agreement between the Company and Steven A. Newman
23.1 Consent of Grant Thornton LLP
99.1 Sarbanes-Oxley Act of 2002 Certifications
SIGNATURES
Pursuant to the requirements 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.
XYBERNAUT CORPORATION
By: /s/ EDWARD G. NEWMAN
----------------------------
Edward G. Newman
Chief Executive Officer and
Chairman of the Board of Directors
By: /s/ THOMAS D. DAVIS
----------------------------
Thomas D. Davis
Senior Vice President and
Chief Financial Officer
By: /s/ STEVEN A. NEWMAN
----------------------------
Steven A. Newman
President, Chief Operating Officer and
Vice Chairman of the Board of Directors
Date: April 30, 2003
12
CERTIFICATIONS
I, Edward G. Newman, certify that:
1. I have reviewed this annual report on Form 10-K/A of Xybernaut
Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
April 30, 2003
XYBERNAUT CORPORATION
By: /s/ EDWARD G. NEWMAN
----------------------------
Edward G. Newman
Chief Executive Officer and
Chairman of the Board of Directors
I, Thomas D. Davis, certify that:
1. I have reviewed this annual report on Form 10-K/A of Xybernaut
Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
April 30, 2003
XYBERNAUT CORPORATION
By: /s/ THOMAS D. DAVIS
----------------------------
Thomas D. Davis
Senior Vice President and
Chief Financial Officer
I, Steven A. Newman, certify that:
1. I have reviewed this annual report on Form 10-K/A of Xybernaut
Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
April 30, 2003
XYBERNAUT CORPORATION
By: /s/ STEVEN A. NEWMAN
---------------------------------------
Steven A. Newman
President, Chief Operating Officer and
Vice Chairman of the Board of Directors