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, 2006
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
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-3545701
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1717 Diplomacy Row
Orlando, Florida 32809
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(407) 251-4577
----------------------------------------------------
(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 -- 11,359,849 shares as of July 20, 2006.
Index to Form 10-QSB
Page No.
Part I - Financial Information --------
Item 1. Financial Statements (unaudited):
Balance Sheet as of January 31, 2006 3
Statement of Changes in Stockholders' Equity
for the Six Months Ended April 30, 2006 4
Statement of Changes in Stockholders' Equity
for the Six Months Ended April 30, 2005 5
Statements of Operations for the Three and Six Months
Ended April 30, 2006 and April 30, 2005 6
Statements of Cash Flows for the Six Months
Ended April 30, 2006 and April 30, 2005 7-8
Notes to Financial Statements 9-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Results of Operations 13-14
Liquidity and Capital Resources 15
Item 3. Controls and Procedures 16
Part II - Other Information
Item 1. Legal Proceedings 17
Item 2. Unregistered Sales of Equity Securities and uses of funds 17
Item 3. Defaults upon Senior Securities 17
Item 4. Submission of matters to a vote of security holders. 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
Certifications 18-22
Signatures 23
Page 2 of 23
DATAMETRICS CORPORATION
BALANCE SHEET
(Unaudited)
(in thousands, except share data)
April 30,
2006
--------
ASSETS
Current Assets
Cash $ 634
Accounts receivable, net of allowance for doubtful accounts of $0 234
Inventory, net of allowance for obsolete inventory of $6,070 665
Other Current Assets 49
--------
Total current assets 1,582
Property and Equipment
Furniture, fixtures and computer equipment 1,195
Machinery and equipment 547
--------
Total Property and Equipment 1,742
Less Accumulated Depreciation (1,742)
--------
Net Property and Equipment --
Total Assets $ 1,582
========
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts Payable $ 230
Accrued Expenses 329
Warranty Reserve 40
Notes Payable 641
--------
Total Current Liabilities 1,240
Stockholders Equity:
4% Cumulative Preferred Stock, $.01 par value ($750 aggregate liquidation
preference); 5,000,000 Authorized; 500,000 issued and outstanding 5
Common Stock, $.01 par value; 70,000,000 shares
Authorized; 10,859,849 issued and outstanding 109
Additional Paid In Capital 67,811
Accumulated Deficit (67,583)
--------
Total Stockholders Equity 342
Total Liabilities and Stockholders Equity $ 1,582
========
- --------------------------------------------------------------------------------
The accompanying "Notes to Financial Statements"form an integral part
of these statements.
- --------------------------------------------------------------------------------
Page 3 of 23
DATAMETRICS CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
For the six months ended April 30, 2006
(in thousands, except share data)
Common Stock Ser. A Preferred Ser. B Preferred
------ ----- ---------------------- ------------------------
Number Dollar Number Dollar Number Dollar
of Shares Amount of Shares Amount of Shares Amount
-----------------------------------------------------------------------------------------------
Balances at Oct. 31, 2005 1,070,403 $ 11 892,652 $ 9 -- --
Conversion of DMTR loan
of $2.9 million plus
accrued interest 8,157,872 82 2,998 3,080
Conversion of Series A
Preferred into
Common Stock 1,631,574 16 (892,652) (9) (7) --
Conversion of 12% Bridge
loan into Series B
Preferred Stock 500,000 $ 5 495 500
Warrants for the purchase
of 386,314,860 shares
of Common Stock 5,873 5,873
Net Loss (5,829) (5,829)
----------- ----------- ----------- ----------- ----------- -----------
Balances at April 30, 2006 10,859,849 $ 109 -- -- 500,000 $ 5
Add'l Stock
Paid-In Accum holders
Capital Deficit Deficit
-------------------------------------------
Balances at Oct. 31, 2005 $ 58,452 $ (61,754) $ (3,282)
Conversion of DMTR loan
of $2.9 million plus
accrued interest
Conversion of Series A
Preferred into
Common Stock
Conversion of 12% Bridge
loan into Series B
Preferred Stock
Warrants for the purchase
of 386,314,860 shares
of Common Stock
Net Loss
-------------------------------------------
Balances at April 30, 2006 $ 67,811 $ (67,583) $ 342
Shares of Common Stock have been adjusted retroactively to reflect the reverse
stock split that occurred in April 2006.
The accompanying "Notes to Financial Statements"
form an integral part of these statements.
Page 4 of 23
DATAMETRICS CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
For the six months ended April 30, 2005
(in thousands, except share data)
Common Stock Ser. A Preferred Total
------ ----- -------------------- Add'l Stock
Number Dollar Number Dollar Paid-In Accum. holders
of Shares Amount of Shares Amount Capital Deficit Deficit
---------------------------------------------------------------------------------------
Balances at October 31, 2004 1,070,403 $ 11 892,652 $ 9 $58,452 $(61,171) $(2,699)
Net Loss (789) (789)
Balances at April 30, 2005 1,070,403 $ 11 892,652 $ 9 $58,452 $(61,960) $(3,488)
Shares of Common Stock have been adjusted retroactively to reflect the reverse
stock split that occurred in April 2006.
The accompanying "Notes to Financial Statements"
form an integral part of these statements.
Page 5 of 23
DATAMETRICS CORPORATION
STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
Three Months Ended Six Months Ended
April 30, April 30, April 30, April 30,
2006 2005 2006 2005
-------- --------------------- --------
Sales $ 1,052 $ 396 $ 2,207 $ 993
Cost of Sales 773 373 1,544 805
-------- --------------------- --------
Gross Profit $ 279 $ 23 $ 663 $ 188
-----------------------------------------------
Selling, General and Administrative
Personnel and Related Costs $ 205 $ 292 $ 401 $ 584
Other 158 90 457 167
-----------------------------------------------
Total Selling, General and Administrative $ 363 $ 382 $ 858 $ 751
-----------------------------------------------
Loss from Operations $ (84) $ (359) $ (195) $ (563)
Other income and expense 13 (105) (5,634) (226)
-------- --------------------- --------
Net Income (Loss) $ (71) $ (464) $ (5,829) $ (789)
======== ===================== ========
Loss per share of common stock;
basic and diluted $ (0.007) $ (0.434) $ (0.537) $ (0.737)
======== ===================== ========
Weighted avg. no. of shares outstanding
basic and diluted 10,860 1,070 10,860 1,070
======== ===================== ========
Adjusted to reflect reverse stock split that occurred in April 2006.
The accompanying "Notes to Financial Statements"
form an integral part of these statements.
Page 6 of 23
DATAMETRICS CORPORATION
CASH FLOWS STATEMENTS
(unaudited)
(in thousands, except per share data)
For the six months ended
April 30 April 30
-----------------------
2006 2005
Cash Flows from Operating Activities:
Net Loss (5,829) (789)
Adjustments to reconcile net loss to net cash used
in operating activities:
Gain on Sale of Building (216) --
Depreciation expense 4 30
Amortization of Refinancing Costs -- 104
Expenses Paid from Debt Financing 249 --
Options Issued to Investors during restructuring 5,873 --
Changes in assets and liabilities:
Accounts receivable 36 492
Inventories 242 (162)
Prepaid expenses and other current assets 45 (22)
Accounts payable (262) 133
Other Current Liabilities -- (20)
Accrued expenses (167) 93
Deferred Revenue -- (46)
-----------------------
Net cash used in operating activities (25) (187)
Cash Flows from Investing Activities:
Proceeds from Sale of Building 1,445 --
Capital expenditures for property and equipment -- (4)
-----------------------
Net cash provided by (used in) investing activities 1,445 (4)
Cash Flows from Financing Activities:
Proceeds from loan payable 248 139
Payments on Long Term Debt (1,180) (30)
-----------------------
Net cash provided by (used in) financing activities (932) 109
Net (decrease) increase in cash 488 (82)
Cash at the beginning of the period 146 91
-----------------------
Cash at the end of the period 634 9
-----------------------
Page 7 of 23
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period
for:
Interest, net $ 72 $ 80
NONCASH INVESTING / FINANCING ACTIVITIES
Restructuring incentive expenses paid by issuing
stock options $ 5,873 --
Conversion of long term debt and related accrued
interest into common stock $ 3,081 --
Conversion of long term debt and related accrued
interest into Series B preferred stock $ 500 --
Conversion of Series A preferred stock into
common stock $ 489 --
Expenses paid with the issuance of notes payable $ 249 --
Payment of short term bridge loan by issuing
new note payable $ 200 --
Forgiveness of debt as part of the sale of building $ 30 --
The accompanying "Notes to Financial Statements"
form an integral part of these statements.
Page 8 of 23
DATAMETRICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
April 30, 2006
(Unaudited)
1. The financial statements include the accounts of DataMetrics Corporation.
The accompanying condensed 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, 2005 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, 2006 consist of the following:
Inventories Parts and sub-assemblies 594
Work in Process 135
Obsolete Inventory 6,006
-----------------
Total Inventory 6,735
Reserve for Obsolete Inventory (6,070)
-----------------
Net Inventory 665
3. NOTES PAYABLE
Notes Payable at April 30, 2006 consist of the following:
Notes Payable to investors; interest expense at 10% is paid quarterly; principal
and unpaid interest is due in full in December 2006. The note is secured by a
first priority lien on all Company assets. 500
Subordinated notes, originally due in December 2000, accruing interest at 10%. The notes
are unsecured. Negotiations for repayment have begun with the holders of these notes and
are ongoing at this time 141
-----------------
Total 641
All notes are current.
Page 9 of 23
4. STOCK BASED COMPENSATION
The fair value of the option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:
Risk free interest rate of 3 percent; dividend yield of 0%, expected life
of 10 years and volatility of 50%.
A summary of the status of the Company's stock options as of April 30,
2006, and changes during the quarter are presented below. This summary reflects
the 30:1 reverse stock split that occurred in April 2006:
------------------------------
Weighted Average
Exercise Price
Shares -----------------
(000s)
Outstanding at Beginning of Year 58 $39.20
Granted 12,877 $0.30
Exercised 0
Expired / Canceled 0
------------- ---------------
Outstanding and Fully Exercisable at
the End of the Year 12,935 $0.47
------------- ---------------
Weighted Average Fair Value of Options Granted During the
Year $0.01
------------- ---------------
For all options issued, the exercise price was less than the market price of the
stock and $5,873,000 of stock based cost was recorded.
Significant option groups outstanding at April 30, 2006 and related
weighted average price and life information is as follows. This summary reflects
the 30:1 reverse stock split that occurred in April 2006:
Number Weighted
Outstanding and Average
Fully Remaining
Exercise Exercisable Contractual
Price (000s) Life (YEARS)
$42.00 50 5.55
30.00 5 1.11
1.65 3 1.50
0.30 12,877 9.75
----------------
Total 12,935
================
Weighted average exercise price is $0.473 per option.
Page 10 of 23
5. REVERSE STOCK SPLIT
On April 11, 2006, the Company elected to effect a Stock combination through a
30:1 reverse stock split. Details of the split are described on Schedule 14C as
filed with the Securities and Exchange Commission on March 2, 2006.
All amounts reported for the three and six months ended April 30, 2005 have been
retroactively restated to reflect this split.
6. Basic and Diluted Net Loss per Common Share
Basic and diluted net loss per share are computed using the weighted-average
number of shares of common stock outstanding during the period. Potentially
dilutive securities have been excluded from the computation of diluted earnings
per share, as their effect is antidilutive. If the Company had reported net
income, diluted earnings per share would have included the shares used in the
computation of net loss per share plus common equivalent shares related to
12,934,659 outstanding options and warrants as of April 30, 2006 and 2005
respectively.
Page 11 of 23
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 quarter ended April 30, 2006, 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.
Page 12 of 23
RESULTS OF OPERATIONS
Three Month Period Ended April 30, 2006 Compared
To Three Month Period Ended April 30, 2005
Sales for the quarter ended April 30, 2006 were $1,052,000 an increase of
$656,000 or 166%, compared with sales of $396,000 in the same period in the
prior fiscal year. The increase in sales for the three months ended April 30,
2006 is attributable mainly to execution of substantially large orders booked
and shipped in the current period.
Cost of sales for the quarter ended April 30, 2006 was $773,000 (73% of
sales), an increase of $400,000 or 107%, compared with $373,000 (94% of sales)
for the same period in the prior fiscal year. Cost of sales increased compared
to the same period in the prior fiscal year primarily because of the
corresponding increase in variable manufacturing costs related to increased
sales for the period.
Selling, general and administrative ("SG&A") expenses for the quarter
ended April 30, 2006 were $363,000 (34% of sales) a decrease of $19,000, or 5%,
compared with $382,000 (96% of sales) for the same period in the prior fiscal
year. SG&A expenses, stated as a percentage of sales, decreased substantially
between years due to a drastic increase in sales for 2006 when compared to 2005
and the relatively fixed nature of SG&A expenses in dollar terms.
Net interest expense amounted to $16,000 for the quarter ended April 30,
2006 compared with net interest expense of $122,000 for the same period in the
prior year. The significant decrease in interest expense for the quarter ended
April 30, 2006 compared to the same period of the prior year is attributable to
the reorganization which occurred early in fiscal year 2006. As a result of the
said reorganization, the majority of long term loans were either paid in full or
converted into equity of DataMetrics Corporation.
The net loss for the quarter ended April 30, 2006 amounted to $71,000, a
decrease in loss of $393,000 compared with a net loss of $464,000 for the same
period in the prior year. The improvement is attributable primarily to the
increased sales volume in the quarter.
Six Month Period Ended April 30, 2006 Compared
To Six Month Period Ended April 30, 2005
Sales for the six months ended April 30, 2006 were $2,207,000 an increase
of $1,214,000 or 122%, compared with sales of $993,000 in the same period in the
prior fiscal year. The increase in sales for the six months ended April 30, 2006
is attributable mainly to a substantial increase in receipt of orders from the
U.S. Government and major Defense Contractors.
Cost of sales for the six months ended April 30, 2006 was $1,544,000 (70%
of sales), an increase of $739,000 or 92%, compared with $805,000 (81% of sales)
for the same period in the prior fiscal year. Cost of sales increased compared
to the same period in the prior fiscal year primarily because of the
corresponding increase in variable manufacturing costs related to increased
sales in the current six month period.
Selling, general and administrative ("SG&A") expenses for the six months
ended April 30, 2006 were $858,000 (39% of sales) an increase of $107,000, or
14%, compared with $751,000 (76% of sales) for the same period in the prior
fiscal year. While the dollar amount of SG&A expenses for 2006 increased by 14%
over the amount reported in 2005 due to restructuring costs in the first
quarter, SG&A expenses, stated as a percentage of sales, decreased substantially
between years due to a drastic increase in sales for 2006 when compared to 2005.
Page 13 of 23
Net interest expense amounted to $76,000 for the six months ended April
30, 2006 compared with net interest expense of $243,000 for the same period in
the prior year. The dramatic decrease in interest expense for six months ended
April 30, 2006 compared to the same period of the prior year is attributable
mainly to the Corporate reorganization which occurred early in fiscal year 2006.
As a result of the said reorganization, the majority of long term loans were
either paid in full or converted into equity of DataMetrics Corporation.
The net loss for the six months ended April 30, 2006 amounted to
$5,829,000 compared with a net loss of $789,000 for the same period in the prior
year. While the Company's loss from operations has improved significantly over
the same period in the prior fiscal year due to higher sales from large orders,
total net loss for the current period is much larger due to the effect of
issuing options valued at $5,873,000 during the restructuring that occurred in
the first quarter.
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, 2006. 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.
Page 14 of 23
LIQUIDITY AND CAPITAL RESOURCES
Although the Company has generated much of the cash flow to sustain current
operations through a combination of revenues from sales and from equity
transactions, the debt obligations of previous periods were still outstanding at
the end of fiscal year 2005. 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 effected a Stock combination through a 30:1
reverse stock split. Details of the split are described in the above referenced
Schedule 14C.
As part of the restructuring, SG DMTI, LLC ("SGD") purchased 500,000 shares of
the Company's Series B Preferred Stock in exchange for the cancellation of an
aggregate of $499,563 in principal and $467 in accrued interest on certain
promissory notes (the "Notes") issued by the Company and held by SGD. DMTR LLC
("DMTR") converted debt owed to DMTR by the Company (which debt consisted of an
aggregate principal amount of $2,900,000 and accrued, but unpaid interest on the
unpaid principal amount) into common stock. The Company also issued SGD a
warrant 50% of the then issued and outstanding shares of common stock of the
Company on a fully diluted basis for a period of ten (10) years at an exercise
price of $.01 (before giving effect to the one-for 30 reverse stock split).
On December 30, 2005, the Company also issued SGD a secured promissory
note in the principal amount of $500,000 (the "Secured Note"). The Secured Note
accrues interest at a rate of ten (10%) percent per annum and matures on
December 31, 2006. Accrued interest on the Secured Note shall be paid quarterly
commencing March 31, 2006. The Secured Note is secured by a first priority lien
on all of the Company's assets, which lien was placed on the Company's assets at
the time of issuance of the $200,000 note (the "Bridge Note"), which the Company
previously issued to SGD on November 7, 2005. The Company used the proceeds of
the Secured Note to (i) repay the Bridge Note and all accrued interest thereon,
(ii) pay interest on the Notes exchanged for the Series B Preferred Stock, (iii)
pay for certain expenses incurred in connection with the transactions with SGD
and (iv) for general working capital.
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.
Page 15 of 23
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.
Page 16 of 23
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
The Company was in default on certain unsecured indebtedness of
approximately $141,000 in principal and $90,000 in unpaid interest.
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
Page 17 of 23