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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment #1
FORM 10-QSB/A
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended April 29, 2001
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Transition Period from ________ to _________
Commission File Number 1-8690
Datametrics Corporation
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(Exact name of registrant as specified in its charter)
Delaware 95-3545701
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1717 Diplomacy Row
Orlando, Florida 32809
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(Address of principal executive offices) (Zip Code)
(407) 251-4577
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.01 Par Value - 20,512,227 shares as of 9/4/01
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1 of 13
DATAMETRICS CORPORATION AND SUBSIDIARIES
Index to Form 10-QSB
Page No.
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Part I - Financial Information
Item 1. Financial Statements (unaudited):
Consolidated Balance Sheet as of April 29, 2001 ............. 3
Consolidated Statements of Operations for the Three and
Six Months Ended April 29, 2001 and April 30, 2000 ........ 4
Consolidated Statements of Cash Flows for the Six
Months Ended April 29, 2001 and April 30, 2000 .......... 5
Notes to Consolidated Financial Statements .................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ..................... 9
Part II - Other Information
Item 1. Legal Proceedings ......................................... 12
Item 2. Changes in securities and uses of funds. .................. 12
Item 3. Defaults upon Senior Securities ........................... 12
Item 4. Submission of matters to a vote of security holders ....... 12
Item 5. Other Information ......................................... 12
Item 6. Exhibits and Reports on Form 8-K .......................... 12
Signatures .............................................................. 13
2 of 13
DATAMETRICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Unaudited)
(in thousands, except per share data)
April 29,
2001
---------
ASSETS
Current assets:
Cash and cash equivalents $ 39
Accounts receivable, net of allowance for doubtful
accounts of $50 389
Inventories, net 1,871
Prepaid expenses and other current assets 17
-----------
Total current assets 2,316
-----------
Property and equipment, at cost:
Land 420
Building and improvements 1,042
Machinery and equipment 2,554
Furniture, fixtures and computer equipment 2,501
-----------
6,517
Less: Accumulated depreciation and amortization (4,535)
-----------
Net property and equipment 1,882
Non-Current Inventories, net 1,700
Other assets 25
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Total Assets $ 5,923
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LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt 6,385
Accounts payable 881
Other accrued expenses 1,466
-----------
Total current liabilities 8,707
-----------
Long-term debt, less current maturities 888
Loan payable 3,351
Senior priority convertible notes 225
-----------
Total liabilities 13,196
Minority interest --
Stockholders' equity
Preferred stock, $.01 par value; 5,000,000 --
shares authorized, none issued
Common stock, $.01 par value; 40,000,000 shares
authorized 20,512,227 shares issued and outstanding 205
Additional paid-in capital 44,033
Accumulated deficit (51,511)
-----------
Total stockholders' deficit (7,273)
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$ 5,923
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See accompanying notes to consolidated financial statements.
3 of 13
DATAMETRICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except per share data)
(Unaudited) (Unaudited)
Three months ended Six months ended
April 29, April 30, April 29, April 30,
2001 2000 2001 2000
---------------------------- -------------------------
Sales $ 772 $ 1,188 $ 1,630 $ 2,319
-------- -------- -------- --------
Cost of sales 925 1,491 2,106 2,882
Selling, general and administrative 873 542 1,426 1,183
Write-down of inventory 950 -- 950 --
Provision for lease abandonment 250 -- 250 --
Provision for loss on website development costs 194 -- 194 --
-------- -------- -------- --------
Income (loss) from operations (2,420) (845) (3,296) (1,746)
Life insurance proceeds 1,046
Interest expense, net (278) (461) (588) (912)
-------- -------- -------- --------
Income (loss) before minority interest (2,698) (1,306) (2,838) (2,658)
Minority interest -- 18 -- 18
-------- -------- -------- --------
Net income (loss) $ (2,698) $ (1,288) $ (2,838) $ (2,640)
======== ======== ======== ========
Loss per share of common stock:
Basic and diluted $ (0.13) $ (0.07) $ (0.14) $ (0.14)
======== ======== ======== ========
Weighted average number of shares outstanding:
Basic and diluted 20,435 18,997 20,435 18,997
======== ======== ======== ========
See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
SIX MONTHS ENDED
APRIL 29, APRIL 30,
2001 2000
--------- ---------
Cash Flows from Operating Activities:
Net loss $(2,838) $(2,640)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 312 180
Non-card interest and financing costs 456
Minority interest (18)
Write down of inventory 950
Provision for lease abandonment 250
Provision for loss on website development costs 194
Changes in assets and liabilities:
Accounts receivable (316) 1,163
Inventory (50) 241
Prepaid expenses and other current assets (134) (283)
Other assets (195) 179
Accounts payable 399 (45)
Accrued expenses 447 61
Interest payable 666
Taxes payable 90
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Net cash used in operating activities (225) (706)
Cash Flows from Investing Activities:
Proceeds from sale of equity 66 1,200
Capital expenditures for Property, Plant & Equipment (333)
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Net cash provided by (used in) investing activities 66 867
Cash Flows from Financing Activities:
Borrowings on revolving line of credit -- 545
Payments on revolving line of credit (7,407) (500)
Borrowings (Payments) on long-term debt 2,463 (11)
Borrowings on senior priority convertible notes 225
Proceeds from loans 4,889 --
Proceeds from the issuance of common stock and warrants
------- -------
Net cash provided by financing activities 170 34
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Net increase in cash and cash equivalents 11 195
Cash and cash equivalents at the beginning of the period 28 137
------- -------
Cash and cash equivalents at the end of the period $ 39 $ 332
======= =======
Supplemental Disclosures of Cash Flow Information:
Interest paid, net $ 389 $ 289
Non-cash transactions:
Accrual of 10% Senior Subordinates Notes
Due 2000 $ 88 $ --
Accrual of 10% Senior Subordinates
Notes Due 2000 $ 85 $ 248
See accompanying notes to consolidated financial statements.
5 of 13
DATAMETRICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except for per share data)
April 29, 2001
(Unaudited)
1. The consolidated financial statements include the accounts of Datametrics
Corporation and its wholly-and majority-owned subsidiaries (collectively, the
"Company").
The consolidated financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission for the requirements of the Quarterly Report
on Form 10-QSB. Certain information and footnote disclosure normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
consolidated financial statements be read in conjunction with the statements and
notes thereto included in the Company's latest Annual Report on Form 10-K for
the fiscal year ended October 29, 2000 as filed with the Securities and Exchange
Commission.
The information reflects all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of management, necessary to present a
fair statement of the results of operations for the interim periods. Much of the
Company's business is longer term and involves varying development, production,
and delivery schedules. Accordingly, results of a particular quarter or
quarter-to-quarter comparisons of recorded sales and profits may not be
indicative of future operating results, including results for the fiscal year
ending October 29, 2000. The accompanying financial statements have been
prepared assuming the Company will continue as a going concern and do not
include any adjustments that may result should the Company be unable to continue
as a going concern.
2. INVENTORIES Stockroom inventories consist primarily of materials used
by the Company for existing and anticipated contracts and materials and finished
assemblies which are held to satisfy spare parts requirements of the Company's
customers. Those parts not expected to be sold within one year are classified as
a non-current asset. The Company evaluates all inventory for obsolescence and
realizability on a periodic basis and records estimated reserves accordingly.
Inventories as of April 29, 2001 consist of the following:
Inventories of parts and sub-assemblies $ 10,681
Work in process 389
Finished Goods 401
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Inventories, gross $ 11,471
Current inventories 1,871
---------
Total Current Inventories $ 1,871
Non-current inventories 9,600
Less reserve for obsolescence (7,900)
---------
Total Non-Current Inventories $ 1,700
---------
Inventories, net $ 3,571
=========
Due to the Company's emphasis on military products coupled with a lack of
orders for the industrial equipment, it was deemed prudent to increase the
provision for obsolescence for these products. Much of this was classified as
non-current inventory and determined to require a provision following a detailed
review of the inventory on hand. During the quarter ended April 29, 2001, the
Company provided an additional reserve for inventory obsolescence of $950,000.
6 of 13
3. DEBT STRUCTURE
Loan Payable
In December 2000, an investment group headed by the Company's chairman, and
including the six investors who advanced bridge loans )("Bridge Financings") to
the Company during 2000, formed DMTR, LLC, a New York limited liability company
("DMTR"). DMTR has satisfied the $1,496,140 due to the guarantors of the
Company's Senior Bank Facility ("Senior Bank Loan") and has taken an assignment
of the loan documents and the collateral securing that loan. In addition, DMTR
has repaid in December all of the Company's Bridge Financings in the aggregate
amount of $1,305,000 plus interest thereon and taken an assignment of the loan
documents evidencing the Bridge Financings and an assignment of the collateral
securing the Bridge Financings.
Effective January 31, 2001, DMTR and the Company executed loan documents
to provide the Company with a line of credit in the maximum amount of $798,860
(the "Line of Credit"). Accordingly, the Company (assuming a draw of the entire
Line of Credit) is obligated to DMTR in the aggregate amount of $3,600,000
(comprised of $1,496,140 on the Senior Bank Loan, $1,305,000 on the Bridge
Financings and $798,860 on the Line of Credit and subject to the agreement,
described below, to exchange a portion of the Bridge Financings for Common Stock
of the Company). The Line of Credit has a term of two years with interest
(payable monthly) at the Base Rate of Citibank, N.A. plus 100 basis points and
is secured by all assets of the Company, and a pledge of the Company's stock and
assets of its subsidiary. To the extent such assets and stock are pledged to
secure the Senior Bank Loan and the Bridge Financings, the security for the Line
of Credit is subject to such prior security interests. The Company is also
obligated to make mandatory prepayments of the principal of the Line of Credit
on a monthly basis to the extent the Company has available cash in excess of
$200,000 Simultaneously with the closing of the Line of Credit, DMTR and the
Company modified the terms of the Senior Bank Loan and the Bridge Financings to
conform those terms to the terms of the Line of Credit. Therefore, the Senior
Bank Loan and the Bridge Financings mature on January 31, 2003, accrue interest
(payable monthly) at the Base Rate of Citibank N.A. plus 100 basis points and
are subject to the mandatory prepayment provision set forth in the Line of
Credit. As additional consideration for the financings provided by DMTR, the
Company intends to issue a Warrant to DMTR to acquire up to 7,000,000 shares of
the Common Stock of the Company ("Common Stock") on a fully diluted basis giving
effect to a proposed reverse stock split described below with an exercise price
of $.125 per share, exercisable through January 31, 2007. Further, DMTR will
exchange $700,000 in principal amount of the Bridge Financings for the issuance
of 700,000 shares of Common Stock (with demand registration rights), such number
of shares determined on the basis of and giving effect to a proposed reverse
stock split described below. The Company will recognize certain charges upon
execution of these intended transactions including approximately $600,000 in
loss relating to the exchange of $700,000 in debt to equity and approximately
$620,000 in original issue discount relating to the estimated valuation of the
warrant to acquire 7,000,000 shares of Common Stock. Approximately $461,000 of
advances were made to the Company under the provisions of this note during the
second fiscal quarter.
Long-term debt
The Company is currently negotiating with the holders of its 10%
Subordinated Notes dated December 24, 1998 in the aggregate principal amount of
$3,524,000 as of December 31, 2000 (the "10% Notes") and its 12% Senior
Subordinated Convertible Secured Notes dated August 2, 1999 in the aggregate
principal amount of $2,835,607 as of December 31, 2000 (the 12% Notes") to
restructure such indebtedness. In each case, the negotiations have assumed that
the Company will amend its Certificate of Incorporation to increase its
authorized capital stock and to effect a 1 for 20 reverse stock split. The
current Chairman and a director of the Company hold certain of the 10% Notes and
12% Notes and have investment discretion over certain accounts of the other
noteholders.
The Company has reached an agreement in principle with a majority of the
Holders of the 10% Notes, subject to the execution and delivery of definitive
Documents, to exchange each $1.00 face amount of the outstanding 10% Notes for
$1.5050 face amount of a new series of step-up coupon convertible two-year Notes
(the "New Notes"). The following describes the terms of the New Notes if the
exchange is completed. The holders of the 10% Notes will waive accrued interest
owing since March 2000 and all other amounts, whether principal, interest,
premium or penalty, owing in respect of the 10% Notes or any instruments
delivered in connection with the 10% Notes. The New Notes will not accrue
interest until the second year after issuance. Interest will then be paid
semi-annually, with the first payment at a rate of 12% per annum and the second
payment at a rate of 16% per annum. The holders of the New Notes may convert
amounts owing under the New Notes to Common Stock at a price of up to $3.00 per
share. The Company may force conversion to Common Stock of up to twenty percent
(20%) of the aggregate principal of the New Notes each quarter if the trading
price of the Common Stock averages $3.25 or more (with an average daily trading
volume of 30,000 shares) for twenty or thirty trading days during such quarter
and the Company may force conversion to Common Stock of up to fifty percent
(50%) of the aggregate principal of the New Notes each quarter if the trading
price of Common Stock averages $4.50 or more for twenty of thirty trading days
during such quarter.
7 of 13
The Company may redeem the New Notes for cash at 85% of par up to the six
month anniversary of their issuance, at 90% of par from the six-month
anniversary through the first anniversary of their issuance and thereafter at
95% of par through the first interest payment date. The Company will be
obligated to redeem 20% of the original principal amount of the New Notes on
each of the first anniversary of their issuance and the first interest payment
date. Such redemption may be effected by payment of cash or forced conversion
into Common Stock if the Company is then permitted so to convert the New Notes.
The Company is also negotiating with the holders of the 12% Notes and the
Company has reached an agreement in principle, subject to the execution and
delivery of definitive documents, with a majority of such holders to exchange
1.1 shares of the Common Stock for each $1.00 in principal of the outstanding
12% Notes. If the exchange is consummated, the holders of the 12% Notes will
waive accrued interest owing since January 2001 and all other amounts whether of
principle, interest, premium or penalty, owing in respect of the 12% Notes or
any instruments delivered in connection with the 12% Notes.
The Company seeks to effect the exchange on substantially the terms
described above. Although the Company has received commitments from a majority
of the holders of the 10% Notes (94% received as of April 29, 2001) and a
majority of the holders of the 12% Notes (89% received as of April 29, 2001),
the closing of the exchange is subject to the execution and delivery of
definitive documents and the amendment of the Company's Certificate of
Incorporation to increase the Company's authorized capital and to effect a 1 for
20 reverse stock split. Further any holder may accept or reject the proposed
exchange as to his 10% Note or 12% Note, as the case may be, and preserve his
claims under his Notes regardless of acceptance of the exchange by any number of
other holders. The Company expects to obtain the consents of the required number
of stockholders under Delaware law for the amendment and reverse stock split
described above and such consents shall be effective twenty (20) days after
proper notice of the actions covered by such consents has been delivered to all
nonconsenting stockholders. In the unlikely event that stockholder approval is
not obtained for the amendment and stock split noted above, the 10% and 12%
Noteholders would retain their rights under the original Notes, whether of
principal, interest, premium or significant penalty. This would have a material
adverse effect on the financial position of the Company.
The reverse stock splits and the conversion of the subordinated notes has
not occurred as of the date of this report. However, mangement has proceeded
with requesting consents of the stockholders to effectuate these transactions,
which are anticipated to occur in the fourth quarter of this fiscal year.
SENIOR PRIORITY CONVERTIBLE NOTES
Pursuant to a private placement offering, the Company has approved the
issuance of up to $1,200,000 in Senior Priority Convertible Notes ("Convertible
Notes") convertible into shares of Common Stock with a first priority lien on
all the Company's assets and Warrants as described below. Such security
interests shall be senior to the interests of DMTR pursuant to an intercreditor
agreement; however, the Convertible Notes will not restrict the Company's
ability to incur additional secured or unsecured indebtedness provided that in
all events all liens shall be junior to those of the holders of the Convertible
Notes. The Convertible Notes mature two years from the date of issue and bear an
interest rate of 10% per annum; interest shall accrue and be payable in a
balloon payment at maturity. Further, the holder(s) of the Convertible Notes
will be issued Warrants to purchase that number of shares of Common Stock which,
upon exercise thereof and conversion of all Convertible Notes, would provide the
holder(s) with ownership of fifty (50%) percent of the adjusted outstanding
shares of the Common Stock. Proceeds from the offering will be used by the
Company for working capital purposes.
The Convertible Notes will be convertible into Common Stock at any time at
the sole discretion of the Company. However, there is no assurance that such
conversion will be implemented by the Company. If all of the Notes are sold and
ultimately converted to Common Stock and all Warrants are exercised for Common
Stock, such Common Stock would represent 50% of the issued Common Stock on a
fully diluted basis. During the second fiscal quarter, $225,000 of the
Convertible Notes were sold.
SUBSEQUENT EVENTS
An additional $800,000 of the aforementioned Senior Subordinated
Convertible Notes were sold during the beginning of the third fiscal quarter.
8 of 13
4. SEGMENT DATA. The Company has two reportable segments: industrial printer and
internet. The industrial printer segment designs, develops and sells industrial
printers for defense contractors and commercial users. The internet segment
consists primarily of a subsidiary engaged in the fulfillment of customized and
personalized products primarily for the business-to-business e-commerce market.
The reportable segments are strategic business units that offer different
products and services. Results for the two reportable segments are as follows:
Printers INTERNET TOTAL Printers INTERNET TOTAL
Six months ended April 29, 2001 Three months ended April 29, 2001
Sales $ 1,630 $ -- $ 1,630 $ 772 $ -- $ 772
Cost of Sales (2,091) (15) (2,106) (925) -- (925)
Other (2,556) (264) (2,820) (2,073) (194) (2,267)
------- ------- ------- ------- ------ -------
Loss from operations (3,017) (279) (3,296) (2,226) (194) (2,420)
Life Insurance proceeds 1,096 -- 1,046 -- --
Total other expenses, net (588) -- (588) (278) -- (278)
------- ------- ------- ------- ------ -------
Loss before minority interest $(2,559) $ (279) $(2,838) $(2,504) $ (194) $(2,698)
======= ======= ======= ======= ====== =======
There was no internet segment data for the comparable periods ended April
30, 2000. The internet segment has no recorded assets.
5. COMMITTMENTS AND CONTINGENCIES
In connection with a Mutual Release and Settlement Agreement between the
Company and the owner of premises formerly leased in California, the Company is
required to issue an additional approximate 2.7 million shares of Common Stock
in accordance with the terms of the agreement, which shares have not been
issued.
6. REORGANIZATION
During the period, Daniel Bertram replaced Vincent Cahill as the Chief Executive
Officer of the Company. Also, during the second quarter, the headquarters was
relocated from Florham Park, New Jersey to Parsippany, New Jersey. The lease at
Florham Park was at that time abandoned. The impact of abandoning the lease has
been provided in the financial statements in the amount of $250,000. The
inventory was deemed to be overvalued at this time due to the product mix
reemphasis and much of the non-defense inventory was reserved in addition to the
slow moving defense contract inventory ($950,000). It was determined at this
time that two of the efforts (MadeMyWay and Our Year Book) were not successful
and a provision should be made against these investments ($194,000).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THREE MONTH PERIOD ENDED APRIL 29, 2001 COMPARED
TO SIX MONTH PERIOD ENDED APRIL 30, 2000
Sales for the three-month period ended April 29, 2001 were $772,000, a decrease
of $416,000 or 35%, compared with sales of $1,188,000 in the same period in the
prior fiscal year. The decrease in sales for the second quarter ended April 30,
2001 is attributable to the Company's change in business plan and the lead time
to develop the military/defense business.
Cost of sales for the second quarter of fiscal 2001 was $925,000 (120% of
sales), an decrease of $566,000 or 38%, compared with $1,491,000 (125% of sales)
for the same period in the prior fiscal year. The decrease in cost of sales is
attributable to lower volume.
Selling, general and administrative ("SG&A") expenses for the three month period
ended April 29, 2001 were $873,000 (113% of sales), an increase of $331,000, or
61%, compared with $542,000 (46% of sales) for the same period in the prior
fiscal year. The increase is due to higher costs for marketing, travel, trade
shows and legal expenses for the Company.
Net interest expense amounted to $278,000 for the three month period ended April
29, 2001 compared with net interest expense of $461,000 for the same period in
the prior year. The decrease is due to a change in debt structure as indicated
in Note 3.
The net loss for the three-month period ended April 29, 2001 amounted to
$2,698,000 an increase of $1,410,000, compared with net loss of $1,288,000 for
the same period in the prior year. The loss for the current three-month period
is attributable to the Company's lack of volume of defense business and
absorption of expense from prior periods not related to operations, a
substantial increase in provisions for lease abandonment ($250,000), inventory
reserves ($950,000) and losses on website development costs ($194,000).
SIX MONTH PERIOD ENDED APRIL 29, 2001 COMPARED
TO SIX MONTH PERIOD ENDED APRIL 30, 2000
Sales for the six month period ended April 29, 2001 were $1,630,000, a decrease
of $689,000 or 30%, compared with sales of $2,319,000 in the same period in the
prior fiscal year. The decrease in sales for the six months ended April 29, 2001
is attributable to the Company's decision to withdraw from the military defense
business and reversing that decision by reintroducing itself into the defense
market.
Cost of sales for the first six months of fiscal 2001 was $2,106,000 (129% of
sales), an decrease of $766,000 or 27%, compared with $2,882,000 (125% of sales)
for the same period in the prior fiscal year. Cost of sales decreased compared
to the same period in the prior fiscal year primarily because a of lower sales
volume to support.
9 of 13
Selling, general and administrative ("SG&A") expenses for the six month period
ended April 29, 2001 were $1,426,000 (87% of sales), a increase of $243,000, or
20%, compared with $1,183,000 (51% of sales) for the same period in the prior
fiscal year. The increase is due to higher administrative and support staff
expenses throughout the Company.
Net interest expense amounted to $588,000 for the six month period ended April
29, 2001 compared with net interest expense of $912,000 for the same period in
the prior year. This decrease is due to a change in debt structure as indicated
in Note 3.
The net loss for the six-month period ended April 29, 2001 amounted to
$2,838,000 a increased loss of $198,000 compared with a net loss of $2,640,000
for the same period in the prior year. The loss for the current six-month period
is attributable to the lead time required to redevelop defense business and an
increase in provisions totalling $1,394,000 for lease abandonment, inventory
reserves and the losses associated with website development costs.
10 of 13
Management has determined that, based on the Company's historical losses from
recurring operations, the Company will not recognize its net deferred tax assets
at April 29, 2001. Ultimate recognition of these tax assets is dependent, to
some extent, on future revenue levels and margins. It is the intention of
management to assess the appropriate level for the valuation allowance each
quarter.
The contract process in which products are offered for sale is generally set
before costs are incurred, and prices are based on estimates of the costs, which
include the anticipated impact of inflation.
The Company's backlog of funded orders not yet recognized as revenue at April
29, 2001 was approximately $1,135,000. All of the backlog is expected to be
delivered during the next twelve months.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements have been to fund working capital
needs, capital expenditures and the payment of long term debt. The Company has
recently relied primarily on internally generated funds, private placement
proceeds, subordinated debt and other bank debt to finance its operation.
The Company's liquidity and cash resources are significantly impaired by ongoing
losses and significant reductions in revenues. The Company has substantial debt
due for repayment during fiscal 2002, which debt cannot be repaid from cash or
other proceeds from operations. As a result, significant additional equity or
other capital are required to meet its debt obligations and satisfy operating
expenses in the short and long term.
The Company expects that such debt can be repaid in whole or in part only from
the proceeds of additional financings of its business or that of its
subsidiaries, the sale of some or all of its interests in its subsidiaries, or
from the proceeds of sale of its common stock, directly or through the
conversion of outstanding warrants or other rights to purchase common stock.
The Company anticipates that it will need to raise additional financing in
the future in the form of debt, or equity or both and has, during the second and
third quarter of 2001 raised $225,000 and $800,000 respectively pursuant to a
private placement debt proceeds as discussed in Note 3 to the financial
statements.
11 of 13
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 of which are discussed at appropriate
points in this report and the Company's other SEC filings and the availability
of funding for the Company's on-going operations.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is, from time to time, the subject of legal litigation, claims
and assessments arising out of matters occurring during the normal operation of
the Company's business. In the opinion of management, the liability, if any,
under such current litigation, claims and assessments would not materially
affect the financial position or the results of operations of the Company,
except as disclosed therein.
In connection with a Mutual Release and Settlement Agreement between the
Company and the owner of premises formerly leased in California, the Company is
required to issue an additional 2.7 million shares of Common Stock in accordance
with the terms of the agreement, which shares have not been issued.
ITEM 2. CHANGES IN SECURITIES AND USES OF PROCEEDS.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
The Company has failed to repay when due amounts owing under its 12%
Subordinated Convertible Secured Notes and 10% Subordinated Notes. The Company
is currently negotiating an exchange of such 12% Notes and 10% Notes for other
securities of the Company and a simultaneous waiver of all amounts and penalties
owing under the 12% Notes and the 10% Notes.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None.
ITEM 5. OTHER INFORMATION. None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibits: None.
Reports on Form 8-K.
During the quarter ended April 29, 2001, the Company filed two (2) reports
on Form 8-K. The first report was filed on February 23, 2001 and relates to: 1)
the approval by the Board of Directors of the Company (the "Board") of an
increase in the authorized shares of the Company's Preferred Stock; and 2) the
approval by the Board of a twenty (20) to one (1) reverse stock split of the
Company's Common Stock. both of these approvals were subject to shareholder
approval. On February 28, 2001, an amendment to the Form 8-K filed on February
23, 2001 was filed for the sole purpose of changing the address and telephone
number of the Company on the cover page of the February 23, 2001 Form 8-K. The
second report on Form 8-K was filed on April 27, 2001, and relates to Michael R.
Planit's resignation from the Board.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Form 10-QSB to be signed on its behalf by its
duly authorized representatives.
DATAMETRICS CORPORATION
-----------------------
(Registrant)
Dated: September 11, 2001 /s/ DANIEL BERTRAM
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Daniel Bertram
Chief Executive Officer
Dated: September 11, 2001 /s/ PHILLIP E. LAMBERT
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Phillip E. Lambert,
Chief Accounting Officer
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