Exhibit 99.1
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Journalist/Media Contact:
Michael Binko
Xybernaut Corporation
(703) 631-6925
publicrelations@xybernaut.com
XYBERNAUT(R) ANNOUNCES COMPLETION OF AUDIT COMMITTEE
INVESTIGATION, BOARD'S ADOPTION OF RECOMMENDATIONS
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
FAIRFAX, VA - APRIL 19, 2005 -- Xybernaut 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.
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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.