BindView Completes SEC Filings for Nasdaq Compliance

Business Wire, Dec 21, 2004

HOUSTON -- BindView Corporation (Nasdaq:BVEWE), a leading provider of policy compliance, vulnerability management and directory administration solutions, today announced that it has filed with the Securities & Exchange Commission its Form 10-Q for the third quarter of 2004. The Company also filed an amended Form 10-K for 2003 and amended Forms 10-Q for the first and second quarters of 2004 to restate previously issued financial statements for the $1.0 million overstatement of revenues from Latin America. The Company believes that these filings meet the compliance requirements of the Nasdaq Marketplace Rules 4310(c)(14), and the Company expects that the "E," which was added to its trading symbol on November 26, 2004, will be removed in due course.

Third Quarter Financial Results

As mentioned above, the Company filed its Form 10-Q for the third quarter of 2004. This report includes the Company's results of operations for the third quarter. Revenues for the third quarter of 2004 were $17.2 million, which was in line with the estimate set forth in the October 28, 2004, press release and conference call. The net loss for the period was $2.6 million, which was $0.4 million higher than the previously issued estimate, due to increased professional fees related to the Company's Sarbanes-Oxley compliance efforts.

Investigation of BindView's Latin American Operations and Restatement of Financial Statements

In October 2004, as a result of information obtained by the Company in its efforts to collect certain receivables from Latin American resellers, the Company's Audit Committee commenced an investigation of the Company's Latin American operations. On December 6, 2004, with the investigation substantially complete, the Audit Committee concluded that due to errors with the transactions described below, the Company would restate its financial statements for the year ended December 31, 2003, and the first two quarters of 2004, and also concluded that those previously issued financial statements should no longer be relied upon. These conclusions were set forth in the Form 8-K dated December 6, 2004, and were discussed with the Company's independent registered public accounting firm. The Audit Committee investigation was completed on December 8, 2004.

In amended filings made today with the Securities & Exchange Commission, the Company's previously issued financial statements for the periods referenced above have been restated to correct for an overstatement of approximately $1.0 million in revenues, involving six transactions in Latin America. As a result, the Company's reported revenues were overstated by $173,000 in the fourth quarter of 2003; $131,000 in the first quarter of 2004; and $698,000 in the second quarter of 2004.

Revenues for the fourth quarter of 2003 were overstated by $173,000 related to a product return, which certain Company personnel in Latin America knew to have occurred within the contractually allowable return period, but which they did not report to the Company's accounting department. If this return had been reported in a timely manner to the Company's accounting department, revenues from this transaction would not have been recognized in the fourth quarter of 2003. Certain personnel in Latin America who knew of the product return also made inaccurate representations as to status of the receivable in response to the on-going collection efforts of the Company's accounting department.

Revenues for the first quarter of 2004 were overstated by $131,000. This was comprised of (i) two separate transactions with a single reseller and an end-user customer for which professional services revenues were overstated by $122,000; and (ii) maintenance revenue of $9,000 on the December 2003 transaction referred to above. The overstatement of professional services revenues resulted from the recording of revenues based on invalid contracts and statements of work that had been submitted to the Company's accounting department by certain personnel in Latin America. These documents, certain of which the Company believes were falsified prior to being submitted to its accounting department, purported to show that the Company had entered into an arrangement with a subsidiary of the reseller to provide services to the end-user customer on behalf of the Company.

Revenues for the second quarter of 2004 were overstated by $698,000, resulting from the recording of three transactions based on invalid documents that had been submitted to the Company's accounting department by certain personnel in its Latin American operations. These documents, which the Company believes were falsified prior to being submitted to its accounting department, included contracts and professional services statements of work and time sheets that purported to show that valid arrangements supporting the underlying transactions had been entered into with third parties. Certain personnel in Latin America also made inaccurate representations as to status of these receivables in response to the on-going collection efforts of the Company's accounting department.