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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, 2000
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)
25B Hanover Road
Florham Park, New Jersey 07932
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(Address of principal executive offices) (Zip Code)
(973) 377-3900
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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
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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 -- 18,997,227 shares as of 6/1/00
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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 30, 2000 3
Consolidated Statements of Operations for the Three and
Six Months Ended April 30, 2000 and April 25, 1999 4
Consolidated Statements of Cash Flows for the Six
Months Ended April 30, 2000 and April 25, 1999 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II - Other Information
Item 1. Legal Proceedings 8
Item 2. Changes in securities and uses of funds. 8
Item 3. Defaults upon Senior Securities 9
Item 4. Submission of matters to a vote of security holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
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DATAMETRICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
April 30,
2000
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<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 332
Accounts receivable, net of allowance for doubtful accounts of $50 1,228
Inventories, net 2,935
Prepaid expenses and other current assets 837
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Total current assets 5,332
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Property and equipment, at cost:
Land 420
Building and improvements 1,042
Machinery and equipment 3,657
Furniture, fixtures and computer equipment 2,623
Leasehold improvements 86
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7,828
Less: Accumulated depreciation and amortization (5,699)
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Net property and equipment 2,129
Inventories, net 2,766
Other assets 992
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$ 11,219
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving line of credit $ 1,496
Current maturities of long-term debt 6,142
Accounts payable 894
Other accrued expenses 318
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Total current liabilities 8,850
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Long-term debt, less current maturities 910
Loan payable 800
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Total liabilities 10,560
Minority interest -
Stockholders' equity
Preferred stock, $.01 par value; 5,000,000 shares authorized, none issued -
Common stock, $.01 par value; 40,000,000 shares authorized
18,997,227 shares issued and outstanding 190
Additional paid-in capital 43,885
Accumulated deficit (43,416)
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Total stockholders' equity 659
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$ 11,219
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</TABLE>
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DATAMETRICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three months ended Six months ended
April 30, April 25, April 30, April 25,
2000 1999 2000 1999
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(in thousands, except per share data)
<S> <C> <C> <C> <C>
Sales $ 1,188 $ 2,302 $ 2,319 $ 3,888
Cost of sales 1,491 1,298 2,882 2,444
Selling, general and administrative 542 801 1,183 1,668
Lease settlement expense - - - 1,225
--------- --------- --------- ---------
Income (loss) from operations (845) 203 (1,746) (1,449)
Interest expense, net 461 116 912 240
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Income (loss) before minority interest (1,306) 87 (2,658) (1,689)
Minority interest 18 - 18 -
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Net income (loss) $ (1,288) $ 87 $ (2,640) $ (1,689)
========= ========= ========= =========
Loss per share of common stock:
Basic and diluted $ (0.07) $ - $ (0.14) $ (0.10)
========= ========= ========= =========
Weighted average number of shares outstanding:
Basic and diluted 18,997 17,123 18,997 16,851
========= ========= ========= =========
</TABLE>
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, APRIL 25,
2000 1999
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<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (2,640) $ (1,689)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 180 232
Non-cash interest and financing costs 456 -
Minority interest (18) -
Changes in assets and liabilities:
Accounts receivable 1,163 (396)
Inventory 241 (456)
Prepaid expenses and other current assets (283) (6)
Other assets 179 35
Accounts payable (45) (26)
Accrued expenses 61 973
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Net cash used in operating activities (706) (1,333)
Cash Flows from Investing Activities:
Capital expenditures for property and equipment (333) (101)
Proceeds from sale of equity in subsidiary 1,200 -
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Net cash provided by (used in) investing activities 867 (101)
Cash Flows from Financing Activities:
Borrowings on revolving line of credit 545 426
Payments on revolving line of credit (500) (2,095)
Payments on capitalized lease obligations - (24)
Borrowings on long-term debt - 1,200
Payments on long-term debt (11) -
Borrowings on loan payable -
Proceeds from bridge notes - 400
Proceeds from short term loans - 50
Proceeds from the issuance of common stock and warrants - 1,559
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Net cash provided by financing activities 34 1,516
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Net increase in cash and cash equivalents 195 82
Cash and cash equivalents at the beginning of the period 137 228
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Cash and cash equivalents at the end of the period $ 332 $ 310
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Supplemental Disclosures of Cash Flow Information:
Interest paid, net $ 289 $ 86
Non-cash transactions:
Exchange of 7% Convertible Debentures for 10% Senior Subordinates Notes
Due 2000 $ - $ (1,750)
Exchange of Senior Subordinated Debentures for 10% Senior Subordinates
Notes Due 2000 $ - $ (500)
Conversion of accrued interest to 12% Subordinated Convertible Secured Notes
Due 2000 $ 248 $ -
</TABLE>
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DATAMETRICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2000
(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 31, 1999 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.
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 does not amortize its non-current inventory,
but the Company evaluates all inventory for obsolescence on a periodic basis and
records estimated reserves. Inventories as of April 30, 2000 consist of the
following:
Inventories of parts and sub-assemblies $ 10,789
Work in process 191
Finished Goods 221
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11,201
Less non current inventories (2,766)
Less reserve for obsolescence (5,500)
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$ 2,935
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3. SALE OF THE MILITARY BUSINESS. In January 2000, the Company's Board of
Directors approved the sale of the Company's military business. The Company is
seeking to sell the entire inventory, customer lists and manufacturing drawings
and specifications related to this line of business. The Company has redirected
its efforts exclusively to the manufacturing and marketing of the Condor(TM) and
Harrier (TM) high speed thermal transfer printers and the management and
operations of its internet-based MadeMyWay.com(TM). In January 2000, the
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Company also terminated approximately 30 employees. Severance was insignificant
and there were no other exit costs related to the planned disposition of the
military business incurred as of April 30, 2000.
4. SALE OF COMMON STOCK. In March 2000, the Company sold 600,000 shares of
Common Stock in MadeMyWay.com to an outside investor for approximately $1.2
million. The sale reduced the Company's ownership interest in MadeMyWay.com from
100% to 88%. Two years after closing the investor has the right to convert its
common shares of MadeMyWay.com into preferred shares of Datametrics Corporation
under certain circumstances as defined in the Stock Purchase Agreement. The
proceeds from the sale will be used for working capital purposes and marketing
of MadeMyWay.com.
5. SEGMENT DATA. The Company has two reportable segments: industrial printer and
internet. The industrial segment designs, develops and sells industrial
printers. The internet segment consists primarily of a newly incorporated
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:
INDUSTRIAL INTERNET TOTAL
For the six months ended PRINTER
April 30, 2000
Sales $ 2,319 $ - $ 2,319
Cost of Sales 2,697 185 2,882
Selling, general and administrative 962 221 1,183
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Loss from operations (1,340) (406) (1,746)
Total other expenses, net (912) - (912)
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Loss before minority interest $ (2,252) $(406) $(2,658)
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
SIX MONTH PERIOD ENDED APRIL 30, 2000 COMPARED
TO SIX MONTH PERIOD ENDED APRIL 25, 1999
Sales for the six month period ended April 30, 2000 were $2,319,000, a decrease
of $1,569,000 or 40%, compared with sales of $3,888,000 in the same period in
the prior fiscal year. The decrease in sales for the six months ended April 30,
2000 is attributable to the Company's decision to withdraw from the military
defense business.
Cost of sales for the first six months of fiscal 2000 was $2,882,000 (125% of
sales), an increase of $438,000 or 18%, compared with $2,444,000 (63% 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 because of lower gross margin
product mix as well as the Company functioning at a lower capacity than the
previous year.
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Selling, general and administrative ("SG&A") expenses for the six month period
ended April 30, 2000 were $1,183,000 (51% of sales), a decrease of $485,000, or
29%, compared with $1,668,000 (43% of sales) for the same period in the prior
fiscal year. The decrease is due to lower administrative and support staff
expenses throughout the Company.
In the prior year the Company incurred lease settlement expense of $1,225,000.
There was no such expense in the current period.
Net interest expense amounted to $912,000 for the six month period ended April
30, 2000 compared with net interest expense of $240,000 for the same period in
the prior year. This increase is due to higher outstanding borrowings and higher
amortization of original issue discount from warrants issued in connection with
certain borrowings.
The net loss for the six-month period ended April 30, 2000 amounted to
$2,609,000 an increased loss of $920,000 compared with a net loss of $1,689,000
for the same period in the prior year. The loss for the current six-month period
is attributable to the Company's decision to withdraw from the military/defense
business and the start-up expenses of its MadeMyWay.com, Inc. subsidiary.
THREE MONTH PERIOD ENDED APRIL 30, 2000 COMPARED
TO THREE MONTH PERIOD ENDED APRIL 25, 1999
Sales for the three-month period ended April 30, 2000 were $1,188,000, a
decrease of $1,114,000 or 48%, compared with sales of $2,302,000 in the same
period in the prior fiscal year. The decrease in sales for the second quarter
ended April 30, 2000 is attributable to the Company's decision to withdraw from
the military/defense business.
Cost of sales for the second quarter of fiscal 2000 was $1,491,000 (126% of
sales), an increase of $193,000 or 15%, compared with $1,298,000 (56% of sales)
for the same period in the prior fiscal year. The increase in cost of sales is
attributable to lower gross margin product mix.
Selling, general and administrative ("SG&A") expenses for the three month period
ended April 30, 2000 were $542,000 (46% of sales), a decrease of $259,000, or
32%, compared with $801,000 (35% of sales) for the same period in the prior
fiscal year. The decrease is due to lower administrative and support staff
expenses throughout the Company.
Net interest expense amounted to $461,000 for the three month period ended April
30, 2000 compared with net interest expense of $116,000 for the same period in
the prior year. The increase is due to higher outstanding borrowings and higher
amortization of original issue discount from warrants issued in connection with
certain borrowings.
The net loss for the three-month period ended April 30, 2000 amounted to
$1,257,000 an increase of $1,344,000, compared with net income of $87,000 for
the same period in the prior year. The loss for the current three-month period
is attributable to the Company's decision to withdraw from the military/defense
business and the start-up expenses of its MadeMyWay.com, Inc. subsidary.
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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, 2000. 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
30, 2000 was approximately $313,000. 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 2000, 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 MadeMyWay or other
subsidiaries, from the sale of its military supply business 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. We are having ongoing
discussions with investors about equity and/or debt financing. While we have
received preliminary indications of interest from investors, as of the date of
this filing, we have no agreements for additional financing. There can be no
assurance that we will be successful in obtaining such additional equity
financing or debt or, if agreed to, that the financing will be completed. If the
financing is completed, we would initially use the funds for working capital
purposes. A portion of the existing obligations may also be extended, refinanced
or converted to equity, but no such agreements to do so exist as of the date
hereof, and may occur or be agreed to.
In March 2000, the Company sold 600,000 shares of Common Stock in MadeMyWay.com
to an outside investor for approximately $1.2 million. The sale reduced the
Company's ownership interest in MadeMyWay.com from 100% to 88%. Two years after
closing the investor has the right to convert its common shares of MadeMyWay.com
into preferred shares of Datametrics Corporation under certain circumstances as
defined in the Stock Purchase Agreement. The proceeds from the sale will be used
for working capital purposes and marketing of MadeMyWay.com.
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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 special
risks, such as the uncertainty of the market for the sale of the military
division, 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.
ITEM 2. CHANGES IN SECURITIES AND USES OF PROCEEDS.
As of March 30, 2000, the Company issued 12% Subordinated Convertible
Secured Notes for total face value of $75,582 to the holders of such notes
previously reported and issued in August 1999 exercising the right of the
Company to do so in lieu of cash interest payments on the existing Notes.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. At April 30, 2000, the Company was in
violation of a financial covenant to Branch Banking & Trust Co. relating
to the ratio of total liabilities to tangible net worth.
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.
(a) List of Exhibits:
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K. None.
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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
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(Registrant)
Dated: June 13, 2000 /s/ DANIEL P. GINNS
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Daniel P. Ginns
Chief Executive Officer and
Chief Financial Officer
Dated: June 14, 2000 /s/ LARRY B. SILVERMAN
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Larry B. Silverman,
Chief Accounting Officer
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