<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 26, 1998
--------------
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 0-8567
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DATAMETRICS CORPORATION
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-3545701
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
25B HANOVER ROAD
Florham Park, New Jersey 07932
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(973) 377-3900
- --------------------------------------------------------------------------------
(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
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INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICAL DATE.
COMMON STOCK. $.01 PAR VALUE--15,578,830 SHARES AS OF MAY 29, 1998
1
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DATAMETRICS CORPORATION
INDEX TO FORM 10-Q
________________________________________________________PAGE NO.________________
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS
AS OF APRIL 26, 1998
AND OCTOBER 26, 1997 3
CONSOLIDATED STATEMENTS OF
OPERATIONS FOR THE SIX
MONTHS ENDED APRIL 26, 1998 AND
APRIL 27, 1997 4
CONSOLIDATED STATEMENTS
OF CASH FLOWS FOR THE SIX MONTHS
ENDED APRIL 26, 1998 AND
APRIL 27, 1997 5
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 10
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS. 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 15
SIGNATURES 16
2
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DATAMETRICS CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
April 26, October 26,
1998 1997
-------------- --------------
(In thousands, except for
share data)
ASSETS
------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 273 $ 200
Accounts receivable, net 1,614 2,875
Inventories 7,140 5,996
Prepaid expenses and other current assets 90 173
-------------- --------------
Total current assets 9,117 9,244
Property and Equipment, at Cost:
Machinery and equipment 3,728 3,717
Furniture, fixtures & computer equipment 2,120 2,132
Building 1,299 -
Leasehold improvements 55 -
-------------- --------------
7,202 5,849
Accumulated depreciation and amortization (4,916) (4,618)
-------------- --------------
Net property and equipment 2,286 1,231
Other Assets 773 1,071
-------------- --------------
$ 12,176 $ 11,546
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Revolving line of credit $ 1,740 $ 992
Current maturities of long-term debt 1,857 1,980
Accounts payable 1,050 1,643
Accrued commissions and payroll 154 639
Accrued warranty 100 100
Other accrued expenses 325 1,018
Other current liabilites - 500
Advance payments and progress payments on contracts - 133
-------------- --------------
Total current liabilities 5,226 7,005
Long-Term Debt, less current maturities:
Loan Payable 1,579 696
Other Long-Term Liabilities 47 323
Commitments and Contingencies
Stockholders' Equity
Preferred Stock, $.01 par value; 5,000,000
shares authorized - -
Common stock, $.01 par value; 40,000,000 authorized;
15,319,830 and 13,283,168 shares issued and
outstanding in 1998 and 1997, respectively 153 133
Additional paid-in capital 37,629 34,177
Accumulated deficit (32,458) (30,788)
-------------- --------------
Total stockholders' equity 5,324 3,522
-------------- --------------
$ 12,176 $ 11,546
============== ==============
</TABLE>
See accompanying notes.
3
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DATAMETRICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three months ended Six months ended
---------------------------- -------------------------
April 26, April 27, April 26, April 27,
1998 1997 1998 1997
------------ -------------- ----------- ------------
(In thousands, except for per share data)
<S> <C> <C> <C> <C>
Sales $ 2,004 $ 6,226 $ 3,529 $ 10,183
Cost of sales 1,036 4,650 2,624 7,357
Research & development 212 21 348 202
Selling, general & administrative 966 1,351 1,992 2,277
------------ -------------- ----------- ------------
Income (loss) from operations (210) 204 (1,435) 347
Interest expense, net 145 118 232 225
------------ -------------- ----------- ------------
Income (loss) before provision
for income taxes (355) 86 (1,667) 122
Provision for income taxes 3 7 3 9
------------ -------------- ----------- ------------
Net income (loss) $ (358) $ 79 $ (1,670) $ 113
============ ============== =========== ============
Earnings (loss) per share of common stock:
Primary and fully diluted $ (0.02) $ 0.01 $ (0.11) $ 0.01
============ ============== =========== ============
Weighted average number of shares outstanding:
Primary and fully diluted 15,035 13,223 14,869 12,712
============ ============== =========== ============
</TABLE>
See accompanying notes.
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DATAMETRICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
Six months ended
-----------------------------------------
April 26, April 27,
1998 1997
----------------- ----------------
(In thousands)
<S> <C> <C>
Cash Flows from Operating Activities
Net income (loss) $ (1,670) $ 113
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 302 341
Bad debt expense 25 -
Changes in assets and liabilities
Accounts receivable 1,236 1,986
Inventories (1,144) 957
Prepaid expenses and other current assets 83 (45)
Other assets 298 -
Accounts payable (593) (1,427)
Accrued commissions and payroll (485) (585)
Accrued warranty - (50)
Other accrued expenses (1,193) (43)
Advance and progress payments from customers (133) (787)
Other long-term liabilites (276) (441)
----------------- ----------------
Net cash (used in) provided by operating activities (3,550) 19
Cash Flows from Investing Activities
Capital expenditures for property and equipment 1,357 151
----------------- ----------------
Net cash used in investing activities 1,357 151
Cash Flows from Financing Activities
Borrowings on revolving line of credit 5,756 4,826
Payments on revolving line of credit (5,008) (7,376)
Redemption of Series B Preferred Stock - (87)
Payments on capitalized lease obligations (6) (35)
Borrowings on long-term debt 899 1,830
Payments on long-term debt (133) (215)
Proceeds from issuance of common stock and warrants 3,472 1,543
----------------- ----------------
Net cash provided by financing activities 4,980 486
----------------- ----------------
Net increase in cash and cash equivalents 73 354
Cash and cash equivalents at beginning of year 200 386
----------------- ----------------
Cash and cash equivalents at end of period $ 273 $ 740
================= ================
Supplemental disclosure of cash flow information
Interest, net $ 214 $ 157
Income taxes $ 3 $ 4
</TABLE>
See accompanying notes.
5
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DATAMETRICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 26, 1998
(Unaudited)
1. The consolidated financial statements include the accounts of Datametrics
Corporation and its wholly-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-
Q. 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 26, 1997 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 25, 1998.
From our latest Annual Report on Form 10-K, the following notes have been
omitted in this Quarterly Report on Form 10-Q: note (1) pertains to summary of
significant accounting policies with respect to the business; basis of
presentation and consolidation; revenue recognition, concentrations of credit
risk and major customers; cash and cash equivalents; inventories; property and
equipment; intangible assets; use of estimates; net loss per share; fair value
of financial instruments; and impairment of long-lived assets; note (2) pertains
to a change in control of the Company; note (3) pertains to non-recurring
charges; note (4) pertains to accounts receivable; note (5) pertains to
inventories; note (6) pertains to other assets; note (7) pertains to income
taxes; note (8) pertains to revolving line of credit; note (9)
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pertains to long-term debt; note (10) pertains to loan payable; note (11)
pertains to leases; and note (12) pertains preferred stock; note (13) pertains
to stock option plans; note (14) pertains to commitments and contingencies; note
(15) pertains to employee benefit plans; note (16) pertains to stockholders'
equity; note (17) pertains to related party transactions; note (18) pertains to
subsequent events; and note (19) pertains to quarterly financial data.
2. INVENTORIES Stockroom inventories are stated at the lower of cost (first-
in, first-out) or market. The Company evaluates at least annually its stockroom
inventories for potential obsolescence or excessive levels based upon backlog
and forecasted usage. Contract inventory costs include purchased materials,
direct labor and manufacturing overhead. General and administrative costs are
expensed in the period incurred. Inventories as of April 26, 1998 consist of
the following:
Stockroom inventories $ 10,811,000
Contracts in process 725,000
-------------
11,536,000
Less reserve for obsolescence 4,396,000
-------------
$ 7,140,000
=============
3. CONTINGENCIES 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 would
not materially affect the financial position or the results of the operations of
the Company except as disclosed herein.
Four former officers of the Company (the "Former Officers"), whose employment
relationships with the Company terminated in part as a result of the Company's
restructuring in October 1996, are seeking severance benefits from the Company.
On January 13, 1997, three of the Former Officers sued the Company in the
Superior Court of the State of California for Los Angeles County, in order to
enforce payment of severance benefits under certain agreements, each dated as of
October 7, 1996, between each Former Officer and the Company (collectively, the
"Severance Agreements"). The fourth Former Officer sued the Company in response
to the Company's cross-complaint described below. The Former Officers seek
damages from the Company based upon the Severance Agreements and an alleged
implied promise not
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to terminate the employment of the Former Officers with the Company without good
cause.
The Former Officers have demanded that the Company pay to each of them (i) an
amount equal to one year of their respective annual salaries in effect as of the
date of termination, payable in a lump sum, (ii) twelve monthly installments
payable to the Former Officers, the total of which would also equal their
respective annual salaries, and (iii) attorney's fees. Total payments under the
Severance Agreements excluding attorney's fees would aggregate approximately
$1,200,000 if due in full to the Former Officers. The complaint did not state,
however, any specific amount of damages sought by the plaintiffs.
On February 12, 1997, the Company filed a cross-complaint against the Former
Officers alleging breach of fiduciary duty, constructive fraud, civil conspiracy
and declaratory relief. At present, it is too early to evaluate fully the
Company's exposure, if any, under this action. Management believes, however,
that it has legitimate defenses and intends to defend vigorously this action.
In a separate matter regarding benefits under the Company's Supplemental
Executive Retirement Plan (the "SERP"), the Company entered into a settlement
agreement (the "Agreement") on February 10, 1998 with the Former Officers in the
total amount of $643,681. The settlement will be made in cash held in a Trust
Account since 1995 totaling $259,681 to be paid in accordance with the
percentages set forth in the Agreement and in common stock totaling 192,000
shares (the "Settlement Shares"). The Settlement Shares are to be sold over a
period of 12 months commencing on or about May 1, 1998. The Company intends to
file a registration statement with respect to the Settlement Shares by July 1,
1998; however, it cannot guarantee when or if the Securities and Exchange
Commission will register the Settlement Shares. As such, the Former Officers
lodged a stipulated judgment in the amount of $384,000. This judgment is in
addition to the cash settlement.
Upon registration of the Settlement Shares, the Former Officers are entitled to
sell 16,000 Settlement Shares per month over a twelve month period. The
proceeds from the sale shall be distributed in accordance with the percentages
set forth in the Agreement. Full completion of these sales shall constitute a
satisfaction of the judgment and shall preclude the Former Officers from
executing on the judgment.
The Company is required to pay $32,000 each month that the Settlement Shares are
not registered beginning on May 1, 1998, but not past the
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twelfth month. For each month the Company is required to pay $32,000, 16,000
Settlement Shares will be returned to the Company. As of May 1, 1998, the
Settlement Shares had not been registered. As a result, the Company paid $32,000
to the escrow agent for the Former Officers, and 16,000 Settlement Shares were
returned to the Company.
The SERP shall be deemed terminated on the later of the date when the cash
settlement is distributed or the date when the Settlement Shares are delivered.
4. SUBSEQUENT EVENT On June 3, 1998, the Company announced a global alliance
agreement with the Traffic Control Materials Division of 3M Company. This long-
term alliance encompasses all markets worldwide served by 3M in the
transportation safety industry. The agreement provides for the Company to
manufacture, service and support its CONDORTM and HARRIERTM industrial print
engines for 3M. Initially, the CONDORTM and HARRIERTM industrial print engines
will become part of 3M's digital imaging system that 3M customers use to produce
license plates. 3M Company is the world's leading supplier of reflective
materials for the transportation safety industry. The global alliance agreement
covers applications in the vehicle license plate market and other potential
traffic safety applications. The Company believes that this agreement will
result in significant revenues to the Company over the next several years.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Six Month Period Ended April 26, 1998 Compared
----------------------------------------------
To Six Month Period Ended April 27, 1997
----------------------------------------
Sales for the six month period ended April 26, 1998 were $3,529,000, a decrease
of $6,654,000 or 65%, compared with sales of $10,183,000 in the same period in
the prior fiscal year. Sales of defense and defense related products decreased
$6,542,000. The decrease in sales for the six months ended April 26, 1998 is
attributable to lower production levels during the Company's preparation to
close its Woodland Hills, California facility on January 31, 1998 and start up
of its new Orlando, Florida facility. During this transition period, the
Company experienced material shortages and labor inefficiencies that resulted in
lower production levels and shipments.
Cost of sales for the first six months of fiscal 1998 was $2,624,000 (74% of
sales), a decrease of $4,733,000 or 64%, compared with $7,357,000 (72% of sales)
for the same period in the prior fiscal year. Although cost of sales is down
from the same period in the prior fiscal year, it has increased as a percentage
of sales. Material shortages resulted in inefficient use of direct labor as
well as the additional cost of overtime. The lower production and shipment
levels were not accompanied by a corresponding reduction of fixed costs as the
Company brought existing customer jobs to as high a level of completion as
possible prior to the closure of the Woodland Hills, CA facility.
Research and development expenses were $348,000 for the six-month period ended
April 26, 1998, an increase of $146,000 or 72%, compared with $202,000 for the
same period in the prior year. Almost all of the expenditures were for the
Company's industrial color printer.
Selling, general and administrative ("SG&A") expenses for the six month period
ended April 26, 1998 were $1,992,000 (56% of sales) a decrease of $285,000, or
13%, compared with $2,277,000 (22% of sales) for the same period in the prior
fiscal year. The decrease is due to decreased professional fees and decreased
selling expenses.
Net interest expense amounted to $232,000 for the six month period ended April
26, 1998 compared with net interest expense of $225,000 for the same period in
the prior year. This increase is due to the
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Subordinated debt being outstanding for the full six months of fiscal 1998
versus five months in 1997.
Income tax expense amounted to $3,000 for the six month period ended April
26,1998 compared with $9,000 for the same period in the prior year.
The net loss for the six-month period ended April 26, 1998 amounted to
$1,670,000 a decrease of $1,783,000, compared with net income of $113,000 for
the same period in the prior year.
Three Month Period Ended April 26, 1998 Compared
------------------------------------------------
To Three Month Period Ended April 27, 1997
------------------------------------------
Sales for the three-month period ended April 26, 1998 were $2,004,000, a
decrease of $4,222,000 or 68%, compared with sales of $6,226,000 in the same
period in the prior fiscal year. Sales of defense and defense related products
decreased $4,168,000 and other sales decreased $54,000 compared with the same
period in the prior year. The decrease in sales for the second quarter ended
April 26, 1998 is attributable to lower production levels during the Company's
opening of its Florida facility.
Cost of sales for the second quarter of fiscal 1998 was $1,036,000 (52% of
sales), a decrease of $3,614,000 or 78%, compared with $4,650,000 (75% of sales)
for the same period in the prior fiscal year. Cost of sales as a percentage of
sales improved due to realization of reserved inventory and reduced labor costs
as a result of staff reduction.
Research and development expenses were $212,000 for the three-month period ended
April 26, 1998, an increase of $191,000, compared with $21,000 for the same
period in the prior year. Almost all of the expenditures were for the Company's
industrial color printer.
Selling, general and administrative ("SG&A") expenses for the three month period
ended April 26, 1998 were $966,000 (48% of sales) a decrease of $385,000, or
28%, compared with $1,351,000 (22% of sales) for the same period in the prior
fiscal year. The decrease is due to decreased professional fees and decreased
selling expenses.
Net interest expense amounted to $145,000 for the three month period ended April
26, 1998 compared with net interest expense of $118,000 for the same period in
the prior year. This increase is due to higher bank borrowings.
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Income tax expense amounted to $3,000 for the three month period ended April 26,
1998, a decrease of $4,000, compared with income tax expense of $7,000 for the
same period in the prior year
The net loss for the three-month period ended April 26, 1998 amounted to
$358,000 a decrease of $437,000, compared with net income of $79,000 for the
same period in the prior year.
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 26, 1998. 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
26, 1998 was approximately $3,129,000. Approximately all of the April 26, 1998
backlog is expected to be delivered during the fiscal year ending October 25,
1998.
Approximately 75% of the Company's backlog consists of orders which are subject
to termination at the convenience of the customer at any time. In the event of
such a termination, the Company is entitled to receive reimbursement for its
costs and, as long as the contract would have been profitable, negotiated
profit.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a revolving line of credit agreement (the "Credit Agreement")
with a bank, collateralized by substantially all of the Company's assets, which
allows the Company to borrow up to $3,000,000 at the bank's reference rate plus
2% (8.5% reference rate at April 26, 1998). The advance rate is eighty percent
(80%) of eligible accounts receivable, plus eighty percent (80%) of eligible
progress billings receivable, to a maximum progress billing receivables
sublimit, which could not exceed the lesser of ten percent (10%) of eligible
receivables or $500,000, plus 15% of qualified inventory up to a maximum
sublimit of $300,000. There was $1,740,000 outstanding at April 26, 1998.
12
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The Credit Agreement requires the Company to maintain profitable quarterly
results, to maintain certain financial ratios and restricts or limits the
Company's ability to: (i) create certain liens; (ii) convey, transfer or sell
assets outside of the ordinary course of business; (iii) make capital
expenditures; (iv) incur additional indebtedness; (v) redeem or repurchase any
class of its stock; and (vi) pay dividends on its preferred or common stock.
The Company is not in compliance with certain of its covenants at April 26,
1998, including profitability.
On March 3, 1998, the Company entered into a Forbearance Agreement with the bank
whereby the bank agreed to extend the maturity date and forbear from taking any
action on the revolving line of credit until April 3, 1998. This date was
subsequently extended until June 4, 1998, and again extended until August 17,
1998 on certain terms and conditions, including the following: (1) interest must
be paid currently and (2) the bank will grant an overadvance not to exceed
$500,000 contingent on the Company raising additional equity on a pari passu
basis.
During November 1996, the Company issued $1,850,000 of Senior Subordinated
Secured Debentures with a maturity date of May 25, 1998 and an annual interest
rate of 10% (effective interest is 10.8% based upon original issue discount).
The proceeds from the sale of the Senior Subordinated Secured Debentures were
used to reduce the line of credit and fund working capital requirements. The
Senior Subordinated Secured Debenture holders received warrants to purchase a
total of 616,679 shares of common stock at a price of $1.50 for each share in
connection with the financing. The warrants are subject to call by the Company
if the closing market price of the Company's common stock is $3.00 or greater
for twenty consecutive days. The warrants expire November 25, 2001. As of May
29, 1998, the Company was in default of its principal and interest obligations
on the Senior Subordinated Debentures. The Company has notified the Senior
Subordinated Debenture holders of its intent to offer to exchange shares of the
Company's common stock for the debentures or to repay in full at a future date,
including interest to the date of repayment. The Company anticipates that some
or all of the Senior Subordinated Debentures will be exchanged for common stock
and the balance repaid in full during the third quarter of 1998.
On October 27, 1997 the Company effected a private placement of 1,394,094 shares
at $1.75 per share for proceeds of approximately $2,440,000.
13
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The Company has received a commitment, subject to normal terms and conditions,
from the members of the Company's Board of Directors, to arrange to raise up to
$2,500,000 of additional capital for the Company as needed during the 1998
fiscal year through a private placement of equity securities or debt securities
or a combination thereof. Although management believes that it can arrange up
to $2,500,000 of new capital, outside factors may impact the amount of capital
actually raised which may result in an adverse impact on the Company's financial
condition. The Company has raised approximately $879,000 through private
placements of 630,000 shares at prices ranging from $1.25 to $1.75 per share.
The Company's working capital and current ratios at April 26, 1998 and at the
end of fiscal years 1997, 1996 and 1995 were $3,891,000, $2,239,000, $3,187,000
and $19,252,000 and 1.7, 1.3, 1.3 and 5.4, respectively. The deterioration in
financial position in fiscal 1996 resulted from the Company's losses during
fiscal 1996.
Management believes that the Company must make approximately $400,000 of capital
expenditures (including capitalized leases) during the remainder of fiscal 1998.
The Company's other principal commitments for fiscal year 1998 are lease
obligations for the Company's facilities, equipment lease, and principal and
interest payments on loans and subordinated debt.
Management expects to finance the capital expenditure requirements and other
commitments from the bank line of credit, issuance of stock, subordinated debt,
capital leases, capital loans and from other sources of 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 of which are discussed at appropriate
points in this report and the Company's other SEC filings, including the fact
that the Company is engaged in supplying equipment and services to U.S.
government defense programs which are subject to special risks, including
dependence on government appropriations, contract termination without cause,
contract renegotiation and the intense competition for available defense
business.
14
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) LIST OF EXHIBITS:
Exhibit 27 - Financial Data Schedule.
(b) REPORTS ON FORM 8-K.
On February 18, 1998, the Company's certifying accountants,
Deloitte & Touche LLP, resigned as reported in its Current Report on Form 8-K
filed with the Securities Exchange Commission on February 25, 1998.
Effective April 23, 1998, the Company engaged BDO Seidman, LLP
as its certifying accountants, as reported in its Current Report on Form 8-K
filed with the Securities Exchange Commission on April 29, 1998.
15
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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-Q to be signed on its behalf by its duly
authorized representatives.
DATAMETRICS CORPORATION
-----------------------
(Registrant)
Dated: 6/8/98 /s/ DANIEL P. GINNS
------------------------------ --------------------------
Daniel P. Ginns
Chief Executive Officer and
Principal Financial Officer
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS OF DATAMETRICS CORPORATION AS OF
AND FOR THE SIX MONTH PERIOD ENDED APRIL 26, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-25-1998
<PERIOD-END> APR-26-1998
<CASH> 273
<SECURITIES> 0
<RECEIVABLES> 1614
<ALLOWANCES> 40
<INVENTORY> 7140
<CURRENT-ASSETS> 9117
<PP&E> 7202
<DEPRECIATION> 4916
<TOTAL-ASSETS> 12176
<CURRENT-LIABILITIES> 5226
<BONDS> 0
0
0
<COMMON> 153
<OTHER-SE> 37629
<TOTAL-LIABILITY-AND-EQUITY> 12176
<SALES> 3529
<TOTAL-REVENUES> 3529
<CGS> 2624
<TOTAL-COSTS> 2624
<OTHER-EXPENSES> 2340
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 232
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