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BioVeris Files Delayed Report

By Michael S. Rosenwald
Washington Post Staff Writer
Tuesday, August 17, 2004; Page E01

BioVeris Corp. filed its delayed annual report with the Securities and Exchange Commission yesterday, only days before a scheduled hearing by the Nasdaq Stock Market on whether to delist the Gaithersburg biotechnology company for failing to report earnings.

The company, which yesterday reported quarterly and annual losses, had previously said it was unable to provide results because of a dispute with its chief executive's son over a joint venture. In two lawsuits, BioVeris accused Jacob N. Wohlstadter of spending $7 million of the joint venture's funds on real estate and luxury cars.

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But as part of a settlement announced Friday, Wohlstadter agreed to turn over financial records that allowed BioVeris to submit its annual report. As part of the deal, BioVeris paid the joint venture $5 million for various licensing obligations and agreed to sell its interests in the venture.

A spokesman for BioVeris declined to explain the reasoning behind the settlement after weeks of sharp accusations and legal maneuvers, and yesterday's filing contained few clues. However, it did note that BioVeris officials had taken into consideration "management's ability to conduct our business and to pursue our strategy."

A hearing panel of the Nasdaq had scheduled a session for Thursday to consider removing BioVeris's stock from its listings.

Though the company reported revenue of $5.1 million for the quarter ended March 31, it reported a loss of $53.5 million ($2 a share), compared with a $12.7 million loss (48 cents) for the same period a year earlier.

For its fiscal year, BioVeris reported revenue of $20 million and a loss of $93.3 million ($3.49), compared with a loss of $50.9 million ($1.90) the previous year.

Much of the quarterly and annual losses stemmed from $75.7 million in merger-related costs. The company has yet to report financial results for the first quarter, ended June 30.

The filing also revealed that Samuel J. Wohlstadter, the company's chief executive, received a $1.27 million bonus during the fiscal year.

Yesterday's filing provided a timeline of the legal tussle between BioVeris and Jacob Wohlstadter.

On June 17, two days after the company went to court against him, Wohlstadter paid the joint venture $2.9 million for property and automobiles he had purchased with its funds. He also assumed responsibility for a $4.1 million agreement to buy another property.

Less than a month later, BioVeris stayed the lawsuit against Wohlstadter and the joint venture to engage in settlement negotiations and finalize the annual report. But that agreement terminated on July 13.

The legal skirmish became more heated the next day, with BioVeris filing a second lawsuit accusing Wohlstadter and the joint venture of breach of fiduciary duty and contract. It also sought the dissolution of the joint venture, saying that Wohlstadter had expanded a "spending spree to epic proportions" in "an effort to exact every last dollar that he could" from the company.

Also in July, a company audit committee hired an independent special counsel to investigate whether management had previous knowledge about the disputed purchases. The special counsel said there was no evidence of such a scenario, according to the annual report.

Between July 19 and Aug. 3, representatives from a joint oversight committee began discussing terms of a settlement with the joint venture and Jacob Wohlstadter. The litigation was stayed during the negotiations.

The filing notes several times that Samuel Wohlstadter was not involved in settlement negotiations or updates about it. The special committee approved a draft settlement Aug. 3, and the parties agreed to terms Thursday.

Shares of BioVeris closed yesterday at $7.27, up 43 cents.

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