VirnetX announces financial statement makeover

Santa Cruz Sentinel
SCOTTS VALLEY – VirnetX, a small publicly owned startup still in the development stage, has announced that it has recalculated its financial statements for 2009 after independent auditors raised flags on how the company was reporting its investments.

The company re-assessed Series I Warrants to purchase about 2.42 million shares of common stock that were issued in connection with a September 2009 private placement.

Previously recorded as equity instruments, the company concluded that they should have been tracked as “a derivative liability, measured at fair value, with changes in fair value recognized as part of other income or expense for each reporting period thereafter.”

The restatement does not impact the company’s previously reported cash.

According to company documents filed with the Securities and Exchange Commission, Kendall Larsen, chief executive officer, and Bill Sliney, chief financial officer, have re-evaluated, with other management, the effectiveness of disclosure controls and procedures and internal control over financial reporting. They “concluded that the company did not maintain effective control over its accounting for the Series I Warrants and that a material weakness existed with respect to the company’s reporting of complex, non-routine transactions …”

Farber Hass Hurley LLP, VirnetX’s independent registered public accounting firm, had highlighted the company’s internal control over financial reporting because of the material weakness described above.

The company, which won a $200 million settlement with Microsoft Corp. last year, reported in August having about $127 million in cash.

This article appeared here.

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