Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this form 10-KSB o

 

 

 

 

 

 

 

 

 

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Annual Report on Form 10-KSB contains forward-looking statements that involve

 

·

business and growth strategies;

·

financial condition and results of operations;

·

forecasts; and

·

trends.

 

Forward-looking statements generally can be identified by the use of forward-looking terminology such as 'believes,' 'expects,' 'may,' 'will,' 'intends,' 'plans,' 'should,' 'seeks,' 'pro forma,' 'anticipates,' 'estimates,' 'continues,' or other variations thereof (including their use in the negative), or by discussions of strategies, opportunities, plans or intentions. Such statements include but are not limited to statements under the captions 'Risk Factors,' 'Management's Discussion and Analysis of Financial Condition and Results of Operations, ' 'Business,' as well as captions elsewhere in this document. A number of factors could cause results to differ materially from those anticipated by such forward-looking statements, including those discussed under 'Risk Factors' and 'Business.'

 

In addition, such forward-looking statements necessarily depend upon assumptions and estimates that may prove to be incorrect. Although we believe that the assumptions and estimates reflected in such forward-looking statements are reasonable, we cannot guarantee that our plans, intentions or expectations will be achieved. The information contained in this registration statement, including the section discussing risk factors, identifies important factors that could cause such differences.

 

PART I

ITEM 1. BUSINESS - GENERAL

 

DataMetrics Corporation (the “Company”), which commenced operations in 1962, is a manufacturer of ruggedized information technology equipment, including computers, printers, workstations, monitors and chassis & enclosures, which are designed to work in harsh environments. The U.S. Military, major defense prime contractors, international military forces, commercial aviation, and heavy industry, such as mining, nuclear power generation, and oil & gas exploration, are the principal end-users of the Company’s products. The Company is primarily a customer driven, application-specific solutions provider. The Company has a core competency in the art and science of “ruggedization” that is at the base of everything it does.

While the specifics of “ruggedization” takes many forms, from strict MIL-specs to varied industrial requirements, its core competency can best be described by this definition: The Company market focus is the sale, design, development, and manufacture of electronic products into industries/applications where the readily-available commercial/industrial grade product would be subject to conditions/requirements that would render it ineffective or impractical for the user. The Company takes existing technology and applies “ruggedization” techniques to substantially increase life and/or usability in adverse user-defined conditions. 

The Company has been in a multi-year transformation in an effort to refocus its core competencies. During this transformation process, it has made forays into new markets. During the fiscal year ended October 31, 2007 approximately 50% of its revenues came from military/defense applications. The Global War on Terror and other military operations continue to have a significant effect on the Company’s business. While much of the increase in the spending by the United States Department of Defense (the “DoD”) is in troop deployment and reconstruction, the Company has seen an increase in opportunities that are consistent with its activities. While there is no guarantee that these programs will be funded or that the Company will be the selected provider, it is an indicator of a shift in the focus of the DoD. The long design cycle for these programs creates an intangible cost in the form of rapid technological obsolescence. Some military programs that would have sought militarized equipment some years ago have modified the requirements to reflect a need for rugged or commercial products. This trend has tended to benefit sales of its rugged product line while impacting its sale of “ultra-rugged” MIL-spec equipment.

The Company has also made successful inroads into other industries which the Company hopes can benefit from its “ruggedization” core competency. For example, the Company designs, develops, and manufactures computers and peripheral equipment for mining, oil & gas exploration, nuclear power generation, and aggregate dredging, where reliable operation of the equipment in challenging environments is imperative.

 

BUSINESS STRATEGY

The Company’s goal is to continually improve its position as a supplier of ruggedized systems and equipment. Our strategies to achieve our objectives include:

·

Leverage Incumbent Relationships. We intend to leverage our relationships with government and industry decision-makers by continuing to deliver high levels of performance on our existing contracts. Our experience has shown that strong performance on existing contracts greatly enhances our ability to obtain additional business with our existing customer base. To accomplish this, we intend to continue to position ourselves as a “best value” provider for our customers. “Best value” is a DoD contracting theme which focuses supplier selection on a variety of criteria, including, but not limited to, suppliers’ past performance, rather than exclusively based on price.

 

 

·

Develop and Expand Existing Technologies. Through a combination of customer-funded research and development and our own internal research and development efforts, we intend to continue to focus on the further development of our products. Customer-funded development contracts enable us to work with our customers to design and manufacture new systems and components, while decreasing our financial risk.

 

The Company primarily uses a direct sales approach in the United States with several independent representatives in key areas. Internationally, the Company uses manufacturers’ representatives in key areas of Europe, Latin America and the Far East.

 

The Company strives to have its customers absorb most of the Company’s research and development and Non-Recurring Expenses (NRE). Despite limited resources, the Company makes a modest investment in research and development. This investment is not considered material at this time, though the impact for these products, such as commercial off-the-shelf (“COTS”) chassis and rugged mobile computers could be significant.

The Company’s commercial airline business unit continues to expand sales volume of its on-board electronic flight bag (EFB) computer which was introduced in 1996. In addition the Company has been sought out by airframe manufacturers to provide a new generation of products. As one of three main manufacturers of FAA certified printers in the world, the Company seeks to garner a greater market share in fiscal year 2008 by updating its current products to the current ARINC standards. The Company will invest to expand its product offering in fiscal year 2008 and provide technology updates to its current product offering.

 

COMPETITION

The primary business of the Company is the design and manufacture of application-specific products for military/defense applications and programs. As such, the Company is often an exclusive provider of goods and services. The Company focuses on collaborating with its customers for products that meet applications rather than marketing specific products. As such, the company’s success is much more dependant on its collaborative efforts with its customers as opposed to bidding against competitors. Overall, because of the breadth of the Company’s product line, the Company competes with different companies for various products. For its chassis’ the Company competes with ELMA, Hybricon, AP Labs and Carlo Gavazzi. The Company competes with Barco and DRS for monitors and with Miltope for printers. In its industrial offering, the Company competes with JLT Mobile Computing and a host of rack-mounted computer manufacturers.

The Company's competitive position in its market segments have been guided by the experience of its technical personnel in their respective specialized fields of Rugged computer and peripheral product design; its broad range of products; its ability to design and manufacture its products to meet customers' specifications; its specialized manufacturing and testing facilities; its long association with many of its customers and its managerial and marketing expertise in dealing with commercial customers, prime Military/Defense contractors and the DoD. The Company believes that once a particular supplier's computer and/or peripheral products have been selected for incorporation in a military or commercial program, further competition by other vendors during the life cycle of that program is limited.

The extent of competition for any single project generally varies according to the complexity of the product and the dollar value of the anticipated award. The Company believes that it competes on the basis of:

·

Its “closeness to the customer”; a cultural belief in building strong customer loyalty through personal contact and professional attentiveness;

 

·

Accumulated technical knowledge and expertise;

·

The performance, flexibility, and price of its products;

·

Reputation for prompt and responsive contract performance; and

·

Breadth of its product lines.

The success of the Company will largely depend upon its ability to leverage business within our existing customer base, establish new customers in both new and existing markets, and identify new program opportunities early enough to be in on the “ground floor”.

 

 

SOURCES OF SUPPLY

The Company is generally not dependent upon any one supplier for any raw material or component we purchase. There are available alternative sources for such raw materials and components which help the Company maintain its costs.

SIGNIFICANT CUSTOMERS AND MATTERS CONCERNING DOD BUSINESS

Most of the customers for the Company's products are the DoD and prime contractors operating under programs funded by the DoD. Because the Company's products are intended to function as subsystems, they are sold to customers which manufacture, sell or use data processing or data communication systems which utilize a processing, printing, recording or data entry function for which the Company's products are suited. While the Company may be a subcontractor on a government program with an aggregate budget of billions of dollars extending over as long as a ten-year period, the Company's share of the budget for any major program is relatively small, generally 1-10% of the budget, depending on the scope.

INTELLECTUAL PROPERTY RIGHTS

The Company's policy is to obtain appropriate proprietary rights protection for any potentially significant new technology acquired or developed by the Company. The Company has a trademark registration covering its "DmC"(R) logo and for the Condor and Harrier printer products.

In addition, the Company relies on copyright and trade secret laws to protect its proprietary rights. The Company attempts to protect its trade secrets and other proprietary information through agreements with customers and suppliers, proprietary information agreements with the Company's employees and consultants and other similar measures. There can be no assurance, however, that the Company will be successful in protecting its trade secrets and other proprietary information.

While management believes that the Company's trademarks, and other proprietary know-how have significant value, changing technology and COTS initiatives within the DoD, makes the Company's future success dependent principally upon its employees' technical competence and creative skills for continuing innovation and ability to adapt to the needs of its customers.

DEFENSE INDUSTRY

Contracts with the U.S. government as well as with U.S. government prime contractors are typically at a fixed price with a delivery cycle of 3 to 12 months. Contracts under any particular program are being subject to further funding and negotiation. The Company's defense contracts contain customary provisions permitting termination at any time at the convenience of the customer and providing for payment for work-in-progress should the contract be canceled.

During the fiscal year ended October 31, 2007, the Company's largest customers were the U.S. Government, Lockheed Martin and American Airlines which accounted for 52% of sales. The loss of any one of these customers could have a material adverse impact on the Company’s operations and financial condition. The Company believes that it has a good reputation with its customers for quality and delivery of its products and services.

Companies that are engaged primarily in supplying equipment and services, directly or indirectly, to the U.S. government are subject to special risks including dependence on government appropriations, termination without cause, contract re-negotiation and competition for the available DoD business.

The Company believes that it will benefit from a trend of increasing DoD budget forecasts and spending. The Company's DoD related contracts provide the DoD the right to audit the Company's cost records and are subject to defective pricing regulation. Management does not believe that it has any material exposure of this sort on any such contracts. Accordingly, no provisions have been made in the Company's accounts in connection with defective pricing regulation.

SERVICE

Pursuant to maintenance agreements, repair orders or warranty provisions, the Company generally services its printers with its own employees at its facility. The Company sells in-house, non-warranty repairs and maintenance service. For both military and commercial products, the Company's standard warranty period is ninety days, although longer warranty periods are available for an additional charge.

The Company also sells spare parts and documentation, such as handbooks, operational manuals, schematics and other technical data to assist its customers in maintaining their own equipment.

RESEARCH AND DEVELOPMENT

For the year ended October 31, 2007 and 2006, we have incurred approximately $139,987 and $40,401 respectively for research and development.

 

 

BACKLOG

The Company's backlog of funded orders not yet recognized as revenue at October 31, 2007 and October 31, 2006 was approximately $1,176,515 and $1,870,390 respectively. Seventy nine percent (79%) of the backlog at October 31, 2006 was realized during the fiscal year ended October 31, 2007. In fiscal year 2008, the Company hopes to realize the majority of this backlog as revenue.

MARKETING

The Company has an in-house marketing group that is comprised of experienced technical professionals who are familiar with the government agencies and companies that comprise our target markets. The Company also uses independent manufacturer sales representatives where it is deemed applicable and cost effective, both domestically and abroad.

 

HAZARDOUS MATERIALS, GOVERNMENT REGULATION AND ENVIRONMENTAL REGULATIONS

 

The Company’s operations necessarily involve the controlled use of hazardous materials and chemicals which are subject to various federal, state and local laws regulating the discharge of materials into the environment. Management believes the Company is in compliance with all material aspects of such rules and safety procedures for handling and disposing of such materials; however, the risk of accidental contamination or injury from these materials cannot be completely eliminated. Compliance has not had a material effect upon capital expenditures, earnings or the Company’s competitive position.

EMPLOYEES

 

The Company employed 32 persons on a full-time basis as of October 31, 2007, compared to 28 persons on a full-time basis as of October 31, 2006. None of our employees are covered by a collective bargaining agreement, nor have we experienced a strike or other adverse work stoppage due to organized labor. Management is not aware of any efforts by employees or outside organizers to create any type of labor union. Management believes that the employer/employee relationship environment is such that labor organization activities are unlikely to occur.

 

AVAILABLE INFORMATION

 

The Company’s internet address is: http://www.datametrics.com. The Company files reports with the Securities and Exchange Commission (“SEC”) as required by SEC rules and regulations on Form 10-QSB and Form 10-KSB these reports are available to the public to read and copy at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.

 

The Company is an electronic filer with the SEC and these reports are available through the SEC internet site (http://www.sec.gov). Copies of documents filed with the SEC are also available free of charge upon request.

 

ITEM 2. PROPERTIES.

The Company's operations are conducted from a 43,000 square foot manufacturing facility in Orlando Florida, which the Company originally purchased in December 1997 and later sold to SG DMTI Capital, LLC (“SGD”), one of the Company’s principal stockholders, for $1,500,000 effective November 1, 2005. Contemporaneously with the sale, SGD and the Company entered into a five-year triple net lease with an annual rent obligation of $150,000. The property is adequately insured. Property taxes are approximately $27,500 per year and are to be paid by the Company.

 

ITEM 3. LEGAL PROCEEDINGS.

On November 5, 2007, Duos Technologies, Inc. filed a case in circuit court in Duval County, Florida against the Company, and its former President, Daniel Bertram. Duos claims damages of $90,000 which was paid to the Company pursuant to a letter of intent in 2007. Duos is proceeding on four separate counts: (1) breach of contract, (2) fraud in the inducement, (3) negligent misrepresentation and (4) unjust enrichment. The Company disputes these claims and believes them to be without merit. The Company is contesting the action, but there can be no assurance as to the outcome of the litigation.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

 

No matters were submitted to a vote of security holders during the year ended October 31, 2007 through the solicitation of proxies or otherwise.

 

 

PART II

 

ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

EQUITY AND RELATED STOCKHOLDER MATTERS

 

Our common stock is traded on the Over the Counter Bulletin Board “OTC-BB” under the symbol 'DMCP’ we have issued no other classes of stock.

 

As of October 31, 2007, there were approximately 316 shareholders of record of our common stock and 11,552,035 shares outstanding.

 

The Company has not previously declared or paid any dividends on our common stock and does not anticipate declaring or paying any cash dividends in the foreseeable future. The payment of dividends, if any, is within the discretion of the Board of Directors and will depend on the Company's earnings, if any, its capital requirements, and financial condition and other such factors as the Board of Directors may consider.

 

The following table shows the high and low bid prices of our common stock as quoted on the OTC-BB, by quarter, during each of our last two fiscal years ended October 31, 2007 and 2006. These market quotations reflect inter-dealer prices, without retail mark-up, markdown or commissions and may not necessarily represent actual transactions.

 

		Market Prices
Quarter
		High			Low			High			Low
First quarter		$	0.15		$	0.15		$	0.99		$	0.45
Second quarter			0.36			0.36			0.90			0.02
Third quarter			0.36			0.21			0.10			0.10
Fourth quarter			0.30			0.30			0.12			0.12

 

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following discussion of the financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes thereto. The following discussion contains certain forward-looking statements that involve risk and uncertainties. Our actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, risks and uncertainties related to the need for additional funds, the rapid growth of the operations and our ability to operate profitably after the initial growth period is completed. We undertake no obligation to publicly release the results of any revisions to those forward-looking statements that may be made to reflect any future events or circumstances.

 

RESULTS OF OPERATIONS

Fiscal Year 2007 Compared With Fiscal Year 2006.

Sales. We had sales of $3,166,000 for the fiscal year ended October 31, 2007 compared to $3,204,000 in the comparable period in 2006, a decrease of $38,000 or 1%. The decrease in sales is attributable mainly to a decrease in the receipt of orders from our customers.

 

Cost of sales. We had cost of sales of $2,322,000 for the fiscal year ended October 31, 2007, representing approximately 73% of sales, compared to cost of sales of $2,550,000 in the comparable period in 2006, which represented 80% of sales. The decrease of $228,000 or 10% was primarily due to a reduction in manufacturing overhead and fixed costs that were recorded in the comparable period in 2006.

 

Gross profit. We had gross profit of $844,000 for the fiscal year ended October 31, 2007 representing approximately 27% of sales, compared to a gross profit of $654,000 in the comparable period in 2006, which represented 20% of sales. The increase of $190,000 was primarily attributable to decrease in cost of sales as previously discussed.

Selling, general and administrative expenses. We had selling, general, and administrative, “SG&A”, expenses for the fiscal year ended October 31, 2007 of $1,949,000 or approximately 62% of sales, compared to $1,564,000 in the comparable period in 2006, which represented 49% of sales. This represents an increase of $385,000 or 20% in SG&A and is attributable mainly to increased personnel and related costs associated with an increase in headcount for the year and increases in fixed costs.

 

 

Loss from operations. We had loss from operations of $(1,105,000) for the fiscal year ended October 31, 2007 compared to loss from operations of $(910,000) in the comparable period in 2006, an increase of $195,000 or 17%. The net loss from operations is attributable mainly to an increase in SG&A of 20% as discussed previously.

Other expense. We had other expense of $396,000 for the fiscal year ended October 31, 2007 compared to other expense of $1,990,000 in the comparable period in 2006, a decrease of $1,594,000 or 80%. The decrease was primarily due to the issuance to SGD of a warrant to purchase 386,314,860 shares of common stock (on a pre-one for thirty reverse split basis) during the fiscal year ending October 31, 2006 (the “SGD Warrant”) in the amount of $2,186,000. The decrease is also due to a reduction in interest expense as a result of the debt restructuring that occurred on December 30, 2005 where the majority of long term loans were either paid in full or converted into equity of the Company.

Net loss. We had a net loss of $(1,501,000) for the fiscal year ended October 31, 2007 compared to a net loss of $(2,900,000) in the comparable period in 2006. The large net loss in 2006 was due primarily to the issuance of the SGD Warrant. The exercise price for the SGD Warrant was less than the market price of the stock resulting in stock based cost in the amount of $2,186,000 being recorded.

Management has determined that, based on the Company's historical losses from recurring operations, the Company will most likely not recognize its net deferred tax assets at October 31, 2007. Ultimate recognition of these tax assets is dependent, to some extent, on the future revenue levels and margins of the Company. It is the intention of management to assess the appropriate level for the valuation allowance each quarter.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal capital requirements have been to fund working capital. The Company has relied primarily on shareholder loans, private placement proceeds, and subordinated debt to finance its operations. The Company has no material commitments for capital expenditures which would affect its liquidity.

Net cash used in operations was $802,000 in 2007 as compared to $533,000 in 2006. The change from 2007 to 2006 was due primarily to net loss and lower than expected sales volume.

Net cash provided by investing activities in 2006 was $1,438,000. There were no investing activities in 2007. The change from 2007 to 2006 was due primarily to the sale of the building.

Net cash provided /used by financing activities were $485,000 and ($732,000) in 2007 and 2006, respectively. The change from 2007 to 2006 was primarily related to the refinancing of the Property located at 1717 Diplomacy Row, Orlando, FL., and the restructuring that took place on December 30, 2006 as described in Note 16 to the accompanying financial statements.

The Company has generated much of its cash flow to sustain current operations through a combination of sales and through debt and equity transactions.

On December 6, 2006, the Company issued SGD 300,000 shares of Series B Preferred Stock for $300,000. As a result, an aggregate of 1,000,000 shares of Series B Preferred Stock, the total amount of shares issuable under the Series B Preferred Stock and Warrant Purchase Agreement dated December 30, 2005, have been issued to SGD. The proceeds of the sale of the 300,000 shares were used for general working capital.

On December 15, 2006 the Company issued 174,887 shares of Common Stock with a par value of $0.01 in the amount of $20,986 to SGD in lieu of the 4% annual cumulative dividend on the Series B Preferred Stock that was due on November 30, 2006.

On September 4, October 9, December 4, and December 11, 2007, the Company signed agreements with SGD to increase the principal balance of the Secured Promissory Note by $70,000, $60,000, $100,000, and $50,000, respectively, to an aggregate of $800,000. The additional debt did not alter any of the rights and obligations with respect to the Secured Promissory Note other than increasing the principal amount of the loan. The entire principal and any accrued and unpaid interest (which accrues at a rate of 10% per annum) is due in full December 2008. The proceeds were used for general working capital.

On December 18, 2007, the Company executed a Master Revolving Note (the “Comerica Note”) in favor of Comerica Bank (“Comerica”) in the aggregate principal amount of $500,000 (the “Principal Amount”). The Comerica Note accrues interest at a rate equal to the prime rate plus three percent (3%). Pursuant to the Comerica Note, the Company has the right to request advances, from time to time, up to the Principal Amount. Accrued interest on the Note shall be payable monthly commencing in February 2008 until December 1, 2008 (the “Maturity Date”) at which time the payment of the then outstanding Principal Amount plus any accrued but unpaid interest shall be due and payable. So long as any amounts are due and payable under the Note, as the Company collects revenues from its account receivables, such revenues shall automatically be applied to repay any such amounts due under the Comerica Note. As security for the Comerica Note, two (2) letters of credit were issued to Comerica, each in the amount of $267,500 (the “Letters of Credit”). The Letters of Credit were supplied by Philip S. Sassower (“Sassower”) and JAG Multi Investments, LLC, a limited liability company (“JAG”) managed by Alexander Goren (“Alexander”)(Sassower and JAG are hereinafter collectively referred to as the “Guarantors”). Alexander is the father of Andrea Goren, who, along with Sassower, are the members of SG Phoenix Ventures LLC, the managing member of SGD. As consideration for the issuance of the Letters of Credit, the Company paid the Guarantors an aggregate fee of $25,000, which such amount was added to the principal amount of the Secured Promissory Note as described below. As additional consideration for the Guarantors issuing the Letters of Credit, the Company executed a secured demand promissory note in favor of the Guarantors in the aggregate maximum principal amount of $535,000 (the “Guarantor Note”). The obligations of the Company under the Guarantor Note shall not take effect until such time, if ever, that Comerica enforces any of its rights by drawing funds against the Letters of Credit. At such time that Comerica enforces its rights against the Letters of Credit, then the Guarantor Note shall be in full force and effect to the extent of the amounts drawn against the Letters of Credit. The Guarantor Note is secured by substantially all of the assets of the Corporation and, pursuant to the terms of a side letter between, among others, the Guarantors and SGD, ranks pari passu with the Secured Promissory Note. As of January 23, 2008 the Company has been advanced $485,000 of the principal amount of the Comerica note and $185,000 has been repaid on the principal amount of the Comerica note, resulting in a net borrowing $300,000. The funds received from the Comerica Note are being used for general working capital, including payroll.

 

 

On December 18, 2007, the Company signed an agreement to increase the principal balance of the Secured Promissory note from $800,000 to $925,000, a net increase of $125,000, which includes $100,000 of accrued and unpaid interest on the Original Secured Promissory note that is being converted to principal and $25,000 for facilitating the issuance of the Letters of Credit. The additional $125,000 did not alter any of the rights and obligations with respect to the Secured Promissory Note other than increasing the principal amount of the loan. In addition this agreement extends the original due date of the Secured Promissory Note to December 15, 2008.

On December 21, 2007, the Company paid an amount of $70,000 in principal and $211 in interest against the Secured Promissory note; thereby reducing the principal balance to $855,000.

Even though the Company has incurred losses over the past several years, Management has taken action to ensure the Company will continue as a going concern. In addition, the Company has a backlog of $1,176,515 at October 31, 2007. The Company believes that SGD, the holder of the Secured Debt, all of the outstanding Series B Preferred Stock and the warrant exercisable for 50% of the Company’s outstanding common stock may be willing to provide the financial resources to properly finance the growth of the Company. Based on the past investments made by SGD, Management believes SGD to be a long term investor that may be willing to provide financial resources in the event of shortfalls while the Company invests in new products and infrastructure. Consequently, Management believes that these actions will enable the Company to continue as a going concern through October 31, 2008 but there is no assurance that SGD will continue to be willing to provide necessary financing.

OFF BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements to report.

DEFAULTS UPON SENIOR SECURITIES

The Company is in default on a certain unsecured subordinated note to the Rich Family Trust of $140,960 in principal; and $106,895 in unpaid interest as the monthly payments of $10,000 that were to commence September, 2006.

FORWARD LOOKING STATEMENTS--CAUTIONARY FACTORS

Except for the historical information and statements contained in this report, the matters set forth in this report are "forward-looking statements" that involve uncertainties and risks. Some are discussed at appropriate points in this report and the Company's other SEC filings. Others are included in the fact that the Company has been engaged in supplying equipment and services to the U.S. government defense programs which are subject to special risks, including dependence on government appropriations, contract termination without cause, contract re-negotiations and the intense competition for available defense business.

 

 

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

DATAMETRICS CORPORATION

 

Table of Contents

Reports of Independent Registered Certified Public Accounting Firms
Condensed Consolidated Balance Sheet
Condensed Consolidated Statements of Operations
Condensed Consolidated Statements of Capital Deficit
Condensed Consolidated Statements of Cash Flows