UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
{X} Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended April 30, 2005
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 | | No |X|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) Yes | | No |X|
Common Stock. $.01 Par Value -- 10,177,146 shares as of April 17, 2006.
Index to Form 10-QSB
Page No.
Part I - Financial Information --------
Item 1. Financial Statements (unaudited):
Consolidated Balance Sheet as of April 30, 2005 3
Consolidated Statements of Operations for the three Months
Ended April 30, 2005 and April 30, 2004 4
Consolidated Statements of Operations for the six Months
Ended April 30, 2005 and April 30, 2004
Consolidated Statements of Cash Flows for the six Months
Ended April 30, 2005 and April 30, 2004 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Results of Operations 8-9
Liquidity and Capital Resources 10
Item 3. Controls and Procedures 11
Part II - Other Information
Item 1. Legal Proceedings 12
Item 2. Unregistered Sales of Equity 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
Certifications 14-18
2
DATAMETRICS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except share data)
April 30,
2005
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ASSETS
Current Assets
Cash $ 9
Accounts receivable, net of allowance for doubtful accounts of $0 175
Inventory, net of allowance for obsolete inventory of $6,006 659
Other Current Assets 62
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Total current assets 905
Property and Equipment
Building and improvements 1,112
Furniture, Fixtures and computer equipment 1,198
Land 420
Machinery and equipment 548
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Total Property and Equipment 3,278
Less Accumulated Depreciation (1,986)
--------
Net Property and Equipment 1,292
Total Assets $ 2,197
========
LIABILITIES AND STOCKHOLDERS DEFICIT
Current Liabilities
Notes Payable $ 139
Accounts Payable 907
Accrued Expenses 760
Deferred Revenue 99
Warranty Reserve 40
Current maturities of LT Debt 3,103
--------
Total Current Liabilities 5,048
Long-Term Liabilities
Long-Term Debt 688
Refinance Cost (51)
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Total Long Term Liabilities 637
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Total Liabilities $ 5,685
Stockholders deficit:
4% Cumulative Preferred Stock, $.01 par value ($940,485 aggregate liquidation
preference); 40,000,000 Authorized; 892,656 issued and outstanding $ 9
Common Stock, $.01 par value; 800,000,000 shares
Authorized; 32,113,000 issued and outstanding 321
Additional Paid In Capital 58,142
Accumulated Deficit (61,960)
--------
Total Stockholders Deficit $ (3,488)
Total Liabilities and Stockholders Deficit $ 2,197
========
The accompanying "Notes to Consolidated Financial Statements"
form an integral part of these statements.
3
DATAMETRICS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
Three Months Ended Six Months Ended
April 30, April 30, April 30, April 30,
2005 2004 2005 2004
-------- -------- -------- --------
Sales $ 396 $ 1,246 $ 993 $ 2,035
Cost of Sales 373 1,142 805 1,757
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Gross Profit $ 23 $ 104 $ 188 $ 278
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Selling, General and Administrative
Personnel and Related Costs $ 292 $ 163 $ 584 $ 552
Other 90 100 167 175
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Total Selling, General and Administrative $ 382 $ 263 $ 751 $ 727
-------- -------- -------- --------
Loss from Operations $ (359) $ (159) $ (563) $ (449)
Other income and expense (105) (109) (226) (209)
-------- -------- -------- --------
Net Income (Loss) $ (464) $ (268) $ (789) $ (658)
======== ======== ======== ========
Loss per share of common stock;
basic and diluted $ (0.014) $ (0.008) $ (0.025) $ (0.020)
======== ======== ======== ========
Weighted avg. no. of shares outstanding
basic and diluted 32,113 32,113 32,113 32,113
======== ======== ======== ========
The accompanying "Notes to Consolidated Financial Statements"
form an integral part of these statements.
4
DATAMETRICS CORPORATION AND SUBSIDIARY
CONSOLIDATED CASH FLOWS STATEMENTS
(unaudited)
(in thousands, except per share data)
For the six months ended
April 30 April 30
------------------------
2005 2004
Cash Flows from Operating Activities:
Net Loss (789) (658)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation expense 30 28
Amortization of Refinancing Costs 104 102
Expenses Paid from Preferred Stock Proceeds -- 20
Allowance for Bad Debts -- (25)
Changes in assets and liabilities:
Accounts receivable 492 (132)
Inventories (162) 5
Prepaid expenses and other current assets (22) (26)
Accounts payable 133 40
Other Current Liabilities (20) --
Accrued expenses 93 24
Deferred Revenue (46) (198)
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Net cash used in operating activities (187) (820)
Cash Flows from Investing Activities:
Capital expenditures for property and equipment (4) --
---- ----
Net cash provided by (used in) investing activities (4) --
Cash Flows from Financing Activities:
Proceeds from Issuance of Preferred Stocks -- 843
Proceeds from Notes Payable 139 --
Payments on Long Term Debt (30) (19)
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Net cash provided by financing activities 109 824
Net (decrease) increase in cash (82) 4
Cash at the beginning of the period 91 110
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Cash at the end of the period 9 114
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest paid, net 80 15
NONCASH FINANCING ACTIVITIES
Expense paid by Issuing Preferred Stock -- 20
The accompanying "Notes to Consolidated Financial Statements"
form an integral part of these statements.
5
DATAMETRICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2005
(Unaudited)
1. The consolidated financial statements include the accounts of DataMetrics
Corporation and its wholly owned subsidiary (collectively, the "Company").
The accompanying condensed consolidated financial statements are unaudited and
have been prepared by the Company in accordance with the rules and regulations
of the Securities and Exchange Commission relating to interim financial
statements. These condensed financial statements do not include all disclosures
provided in the company's annual financial statements. The condensed financial
statements should be read in conjunction with the financial statements and notes
thereto for the year ended October 31, 2004 contained in the company's Form
10-KSB filed with the Securities and Exchange Commission. All adjustments of a
normal recurring nature, which, in the opinion of management, are necessary to
present a fair statement of results for the periods have been made. Results of
operations are not necessarily indicative of the results to be expected for the
full year.
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 and fully reserved. The Company evaluates all inventories
for obsolescence on a periodic basis and records estimated reserves accordingly.
Inventories as of April 30, 2005 consist of the following:
(in thousands)
--------------
Inventories Parts and sub-assemblies 491
Work in Process 168
Obsolete Inventory 6,006
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Total Inventory 6,665
Reserve for Obsolete Inventory (6,006)
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Net Inventory 659
3. NOTES PAYABLE Bridge Loans with interest payable at 12%, principal and
interest due in March 2005, and collateralized by all assets of the Company. The
note holders' rights to collateral are subordinate to the rights of the other
holders of long term debt.
4. DEBT STRUCTURE / SUBSEQUENT EVENTS
In anticipation of the reorganization described in the definitive
information statement on Schedule 14C filed with the Securities and Exchange
Commission on March 2, 2006, the Company borrowed $138,900 during the current
quarter to support operations. These new borrowings had an original maturity
date of March 23, 2005. The Company was unable to repay the loans by the stated
maturity date. However, as described in Schedule 14C, these loans were repaid in
December 2005.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This report contains certain statements of a forward-looking nature
relating to future events or the future performance of the Company. Prospective
investors are cautioned that such statements are only predictions and those
actual events or results may differ materially.
MANAGEMENT FOCUS
The Company designs, develops, and manufactures computers and computer
peripheral equipment for military, industrial and commercial applications where
reliable operation of the equipment in challenging environments is imperative.
The systems and equipment are qualified for use in airborne, shipboard, and
ground based applications. The Company's product lines include a broad range of
computers, computer workstations, servers, printers, plotters and monitors.
The Company offers military specified and ruggedized versions of flat
panel monitors and other peripheral equipment (including computers, printers,
keyboards and trackballs) encased in shock, vibration and temperature resistant
chassis. The chassis produced by the Company are used in conjunction with its
product by the military to house this sensitive ruggedized equipment. The Navy
P3 Orion, Air Force AWACS and Army Fire-Finder programs all require rugged rack
enclosures to protect the equipment from shock, vibration and other damage which
may be experienced in a harsh operating environment. DataMetrics continues to
increase its presence in the military arena including United States Air Force
avionics and ground-based systems as well as United States Army system
diagnostics. DataMetrics' equipment is designed and qualified for use as part of
commercial airlines cockpit systems.
For the six months ended April 30, 2005, the Company experienced slower
than expected receipt of orders. Many of the military programs from which the
Company anticipates generating its revenue have been rescheduled and military
priorities have been reconsidered to account for short, medium, and long-term
needs. The Company expects to see an increase in order activity in the following
quarters and attributes the delay in orders due to a focus on budget spending
for troops and munitions in the war effort in Afghanistan and Iraq. The
following phases in this war and projected increase in overall military /
defense spending will likely entail more sophisticated surveillance techniques
and equipment, which will require data processing and peripheral equipment much
like we currently supply for the AWACS, P3 Orions aircraft and the armed forces.
7
RESULTS OF OPERATIONS
Three Month Period Ended April 30, 2005 Compared
To Three Month Period Ended April 30, 2004
Sales for the quarter ended April 30, 2005 were $396,000 a decrease of
$850,000 or 68%, compared with sales of $1,246,000 in the same period in the
prior fiscal year. The decrease in sales for the three months ended April 30,
2005 is attributable mainly to slower than anticipated receipt of orders.
Cost of sales for the quarter ended April 30, 2005 was $373,000 (94% of
sales), a decrease of $769,000 or 63%, compared with $1,142,000 (92% 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 because of the corresponding
decrease in the cost of materials, direct labor, manufacturing overhead as a
result of the substantial decrease in sales.
Selling, general and administrative ("SG&A") expenses for the quarter
ended April 30, 2005 were $382,000 (96% of sales) an increase of $119,000, or
44%, compared with $263,000 (21% of sales) for the same period in the prior
fiscal year. SG&A expenses for the three month period of 2004 are less than
2005. The Company revised the method of overhead allocation effective February,
2004 and that revision for the entire year to date was reconciled during the
quarterly reporting period of 2004 causing a greater than normal adjustment
during the 2004 quarter. While the dollar amount of SG&A expenses for 2005
increased by 44% over the amount reported in 2004, SG&A expenses, stated as a
percentage of sales, increased much more dramatically between years due not only
to the increase in dollar terms, but also to a drastic reduction in sales for
2005 when compared to 2004.
Net interest expense amounted to $122,000 for the quarter ended April 30,
2005 compared with net interest expense of $109,000 for the same period in the
prior year. The interest rates paid on outstanding balances increased slightly
in 2005. Additionally, the Company had additional borrowing on notes payable in
2005.
The net loss for the quarter ended April 30, 2005 amounted to $464,000, an
increase in loss of $196,000 compared with a net loss of $268,000 for the same
period in the prior year. The increased loss for the current period is
attributable to significant decrease in sales and the fixed nature of selling,
general & administrative expenses.
Six Month Period Ended April 30, 2005 Compared
To Six Month Period Ended April 30, 2004
Sales for the six months ended April 30, 2005 were $993,000 a decrease of
$1,042,000 or 51%, compared with sales of $2,035,000 in the same period in the
prior fiscal year. The decrease in sales is attributable mainly to slower than
anticipated receipt of orders from the U.S. Government and major Defense
Contractors.
Cost of sales for the six months ended April 30, 2005 was $805,000 (81% of
sales), a decrease of $952,000 or 54%, compared with $1,757,000 (86% of sales)
for the same period in the prior fiscal year.
Selling, general and administrative ("SG&A") expenses for the six months
ended April 30, 2005 were $751,000 (76% of sales) an increase of $24,000, or 3%,
compared with $727,000 (36% of sales) for the same period in the prior fiscal
year.
8
Net interest expense amounted to $243,000 for the six months ended April
30, 2005 compared with net interest expense of $226,000 for the same period in
the prior year. The increase is attributable to an increase in borrowings and an
increase in the variable interest rates on some of the loans.
The net loss for the six months ended April 30, 2005 amounted to $789,000
an increase in losses of $131,000 compared with a net loss of $658,000 for the
same period in the prior year. The increased loss for the current period is
attributable to significantly lower sales in 2005 and increased interest expense
on borrowings.
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 30, 2005. 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.
9
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to have substantial debt that was due in 2005 and
2004. Although the Company has generated much of the cash flow through equity
transactions to sustain current operations, the debt obligations of previous
periods have not been met. As a result, additional capital and a significant
restructuring were required to meet its prior period debt obligations.
The details of the restructuring are described with the filing of the
definitive information statement on Schedule 14C as filed with the Securities
and Exchange Commission on March 2, 2006. This includes a description of the
reverse stock split that occurred on April 11, 2006.
On April 11, 2006, the Company elected to effect a Stock combination
through a reverse stock split. Details of the split are described in the above
referenced Schedule 14C.
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.
10
Item 3. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures. Under the supervision and with the
participation of our management, including our principal executive and financial
officer, we have evaluated the effectiveness of the design and operation of our
disclosure controls and procedures (as such term is defined in Rule 13a-15(e) or
Rule 15d-15(e) under the U.S. Securities Exchange Act of 1934, as amended)
within 90 days of the filing date of this quarterly report and, based on their
evaluation, our principal executive and financial officer have concluded that
these controls and procedures are working now and our current period reports
will be filed on time once we have finished filing the backlog of delinquent
reports. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by us in the reports that we file under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms, and that such information
is accumulated and communicated to our management, including our principal
executive and financial officer, as appropriate to allow timely decisions
regarding required disclosure.
(b) Changes in Internal Control Over Financial Reporting. There were no
significant changes in our internal control over financial reporting identified
in connection with the evaluation required by Exchange Act Rule 13a-15(d) or
Rule 15d-15(d) that occurred during the period covered by this quarterly report,
or to our knowledge in other factors, that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is, from time to time, the subject of 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, that are material, have been
properly accrued.
Item 2. Unregistered Sales of Equity Securities and Uses of Proceeds.
None
Item 3. Defaults upon Senior Securities
Effective April 30, 2005, the Company was in default on certain secured
indebtedness owed to various parties in the amount of approximately $3,328,000.
However, all Company obligations were paid or converted to common stock as part
of the restructuring of the Company's capital structure on December 31, 2005 as
more fully described in the definitive information statement on Schedule 14C
filed with the Securities and Exchange Commission on March 2, 2006.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits
(a) Exhibits:
31.1 Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
31.2 Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
32 Certification of CEO and CFO Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
12
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
------------------------
/s/ Daniel Bertram
Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Name Title Date
- ------------------- ------------------------ ---------------
/s/ Daniel Bertram Chief Executive Officer April 17, 2006
- -------------------
Daniel Bertram
/s/ Rafik Moursalien Controller April 17, 2006
- -------------------
Rafik Moursalien
13