SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 13, 1999
CUMETRIX DATA SYSTEMS CORP.
(Exact Name of Registrant as Specified in Charter)
California 001-14001 95-4574138
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
957 Lawson Street
Industry, CA 91748
(Address of Principal Executive Offices)
(626) 965-6899
(Registrant's Telephone Number)
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ITEM 5. OTHER EVENTS
Reference is made to the press release of the Registrant issued on July
13, 1999 which contains information meeting the requirements of this Item 5 and
is incorporated herein by this reference. A copy of the press release is
attached to this Form 8-K as Exhibit 99.
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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 hereunto duly authorized.
July 13, 1999 CUMETRIX DATA SYSTEMS CORP.
By: /S/ CARL L. WOOD
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Carl L. Wood
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
99.1 Press Release Issued July 13, 1999
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EXHIBIT 99.1
CUMETRIX DATA SYSTEMS CORP. ANNOUNCES PRELIMINARY RESULTS OF AUDIT COMMITTEE
INVESTIGATION, MANAGEMENT CHANGES AND DELAY IN FILING ANNUAL REPORT ON FORM
10-K
Company Reports Probable Reduction of Reported Revenues for Second and Third
Quarters of Fiscal Year 1999 by $185,000 and $552,000, Respectively, from
Previously Reported Revenues of $19,418,109 and $16,251,491, Respectively,
and Other Potential Adjustments
(BUSINESS WIRE)--July 13, 1999--Cumetrix Data Systems Corp. (NASDAQ: CDSC),
announced today the preliminary results of an internal investigation into
certain improprieties and record-keeping irregularities. In connection with this
investigation, James Ung, the President of the Company and a director, and Mei
Yang, the Secretary and Treasurer of the Company and a director, have been
relieved from all executive officer and employment responsibilities held by
them, and the Company intends to take all appropriate actions to remove Mr. Ung
and Ms. Yang from the Board of Directors.
The improprieties and record-keeping irregularities that formed the basis
for the investigation were first brought to the attention of the Audit Committee
of the Company's Board of Directors by the Chief Executive Officer and the Chief
Financial Officer of the Company. At the request of the Audit Committee, the
Company's management conducted an initial investigation. After receiving the
results of management's initial investigation, the Audit Committee requested the
Company's outside counsel, Troop Steuber Pasich Reddick & Tobey, LLP, to advise
it in connection with a more detailed investigation. In connection with this
investigation, Troop Steuber Pasich Reddick & Tobey, LLP retained a special
investigative unit of the Company's outside auditors, Arthur Andersen LLP, to
assist it in the investigation.
During the investigation, the Audit Committee was presented with evidence
that certain employees may have been involved in the unauthorized resale of OEM
versions of computer software and may have participated in the falsification of
invoices and other documents to circumvent the Company's internal controls. The
Audit Committee also discovered evidence that unauthorized sales of OEM versions
of computer software may have been made to entities possibly related to these
certain employees, and subsequently repurchased by the Company from these
entities at a higher price without an evident business purpose.
The record-keeping irregularities and other improprieties may amount to a
reduction of reported revenues during the second and third quarters of up to
approximately $185,000 and $552,000, respectively, from previously reported
revenues of $19,418,109 and $16,251,491, respectively. The Company is
quantifying the reduction in net income resulting from these revenue reductions
and will reflect necessary adjustments in its Annual Report on Form 10-K. The
Company also expects that reserves, in an amount yet to be determined, will be
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established in connection with potential claims by the manufacturer of the OEM
versions of computer software which was a subject of the investigation. In
connection with the ongoing investigation, other adjustments may be identified.
The Company intends to act expeditiously to restate its financial results for
these quarters.
The Company also announced today that, due to the results of this
investigation, it will not be able to timely file its Annual Report on Form 10-K
which is due to be filed on or before July 14, 1999. The Company intends to act
expeditiously to complete its preparation of its fiscal year 1999 financial
statements, to cooperate with Arthur Andersen LLP, its independent public
accountants, in their audit of the Company's 1999 financial statements and to
file as soon as practicable the Company's Annual Report on Form 10-K.
The Company has contacted the staff of the Securities and Exchange
Commission to provide complete details of the preliminary results of the
internal investigation. The Company has also initiated contact with the
manufacturer of the OEM versions of computer software at issue in the
investigation.
The Company plans to aggressively pursue every available means to pursue
every remedy available to it for any and all damages resulting to the Company as
a result of the conduct giving rise to the investigation.
The Company notes that Mr. Ung, as President of the Company, was
historically responsible for the origination of a large portion of the sales
attributable to the Company's non-Internet computer components business since
the Company's inception in April 1996. The Company intends to retain the
services of a nationally-recognized executive recruiting firm to search for a
President and Chief Operating Officer, to assume the duties of Mr. Ung as
quickly as practicable. In addition, to facilitate appointment of a new
President and Chief Operating Officer, Jeff Toghraie, the Chief Operating
Officer of the Company has assumed the newly-created position of Vice
President--Marketing. The Company also intends to act aggressively to attract
qualified independent director candidates.
Cumetrix Data Systems Corp. is a provider of computer-related products,
peripherals and configuration services through traditional sales channels and
through online e-commerce. The Company is headquartered in City of Industry,
California.
With the exception of historical information, certain statements in this
press release are forward-looking statements that involve risks and
uncertainties. Actual events or results may differ materially from the Company's
expectations due to various factors. These factors include possible delays in
the search for qualified replacements for the positions held by James Ung and
Mei Yang and for certain director positions; risks associated with litigation;
possible delays in the completion of the preparation of the Company's fiscal
1999 financial statements; possible delays in the audit of the Company's fiscal
1999 financial statements; and possible delays relating to the completion of the
internal investigation. The risks highlighted herein
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should not be assumed to be the only things that could affect the future
performance of the Company. Additional explanation of these factors and other
factors affecting the Company's performance are set forth from time to time in
the Company's filings with the U.S. Securities and Exchange Commission.
Contact: Carl L. Wood, 626-965-6899
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