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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Fiscal Year Ended October 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period From-_________to-_________
Commission File Number 0-8567
DATAMETRICS CORPORATION
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(Exact name of Small Business Registrant)
Delaware 95-3545701
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
25B Hanover Road, Suite 305, Florham Park, New Jersey 07932
(Address of principal executive offices)
Registrant's telephone number, including area code: (973) 377-3900
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, .01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Check whether the Issuer (1) 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 [ ]
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
State Issuer's revenues for its most fiscal year: $8,560,000
State aggregate market value of the voting stock held by non-affiliates of
the Registrant (based on the closing price of such stock as reported by the
American Stock Exchange) on February 10, 2000 was approximately $ 18,997,227.
The number of shares outstanding of the Registrant's Common Stock, as of
the latest practicable date: 18,997,227 shares of Common Stock as of February
10, 2000.
Documents incorporated by reference:
Items 9,10,11 and 12 of Part III are incorporated by reference to the proxy
statement for the 2000 Annual Meeting of Stockholder, or an amendment to this
Form 10-KSB, to be filed within 120 days of the Issuer's fiscal year end.
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PART I
ITEM 1. BUSINESS.
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 that
actual events or results may differ materially. In evaluating such statements,
prospective investors should specifically consider various factors identified in
this report, including that Department of Defense contracts are subject to
termination without cause, competitive factors and pricing pressures.
The Company liquidity and cash resources are significantly impaired by
ongoing losses and significant reductions in revenues. As a result, significant
additional equity or other capital is required to meet its debt obligations and
satisfy operating expenses in the short and long term. We are having ongoing
discussions with investors about equity and/or subordinated 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 subordinated 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.
General
Datametrics Corporation ("Datametrics" or the "Company") designs, develops
and sells high-speed color printers, high-resolution non-impact printer/plotters
and ruggedized computers, printers and workstations. The Company is focused on
the manufacture and sale of its core product line of ruggedized printers and the
continuing development and manufacture of high-performance, high-reliability
concurrent thermal transfer printers.
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.
On January 28, 2000, the Company announced a new strategic direction for
the Company. Responding to the success of its high-speed Condor(TM) and
Harrier(TM) thermal transfer printers; the enthusiastic reception received to
MadeMyWay.com(TM), an internet-based subsidiary of the Company engaged in the
fulfillment of customized and personalized apparel, textiles and specialty
imprinted products primarily for the business-to-business e-commerce market; and
recent declines in military/defense purchases, the Company stated that it would
seek buyers for its military/defense business and focus its efforts exclusively
on (a) the manufacture and marketing of the Condor(TM) and Harrier(TM)
high-speed thermal transfer printers and (b) the management and operation of
MadeMyWay.com.(TM) The Company's new strategic direction has resulted in a
significant reduction in personnel although continuing customer support
activities for the military/defense business will be unaffected.
The Company also announced the closing of its research and development
facility in Calabasas, California. All research and development activity will be
consolidated in the Company's Orlando, Florida facility to allow the closer
exchange of ideas and information among the Company's engineering, marketing and
sales departments.
The Company was incorporated in California in October 1962 and was
reincorporated in Delaware in April 1987. The Company's corporate offices are
located at 25B Hanover Road, Suite 305, Florham Park, New Jersey 07932.
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COMPANY BACKGROUND
The Company's product line includes printers, printer/plotters and
ruggedized computers and workstations with diverse capabilities ranging from
stringent military specifications to varying commercial standards. The Company
pioneered the development of high-speed, non-impact printers for tactical
military applications. At present, ruggedized printers remain the Company's core
product line, and the U.S. government (or the prime contractors to the U.S.
government) remains its largest source of revenue. Building from this base, the
Company has developed and manufactured other high-performance, high-reliability
electronics communications equipment for aerospace, defense, industrial and
commercial markets.
Over the past several fiscal years, the Company has been significantly
impacted by market changes in the U.S. Department of Defense ("DoD"). DoD budget
forecasts indicate that overall funding will continue to decrease for the
foreseeable future. The Company's primary response to these adverse defense
market conditions has been to develop and aggressively pursue industrial and
international opportunities for its ruggedized printers and electronic
communications equipment, expand its core ruggedized product line and to explore
opportunities and strategic alliances for its high-speed digital color printer
products.
DEFENSE PRODUCTS
The Company has designed, developed, manufactured and sold military
specification ("mil-spec") and ruggedized computers, workstations and printers
for use in DoD applications. Products sold by the Company into the DoD markets
can be categorized into three basic groups: mil-spec printers, ruggedized
computers, and ruggedized printers. For the fiscal year ended October 31, 1999,
approximately 54% of the Company's revenues were derived from DoD business,
which includes contractors with U.S. government contracts as well as the DoD
itself.
Mil-spec products are designed specifically to meet military requirements
and must meet the stringent requirements for operation in adverse environments,
including shock, vibration, extreme temperatures and, in some cases, nuclear
radiation. Being so designed, these products are more reliable and significantly
more expensive than ruggedized or industrial products (products designed for
benign environments as are experienced in commercial applications). Industrial
products can be used in selected military environments and are significantly
less expensive than the mil-spec products. The broader intermediary category
includes the ruggedized products which are generally configured to operate in
some adverse environments but do not meet full mil-spec requirements.
MILITARY PRINTERS. The Company manufactured a wide range of printers, which
are categorized as either mil-spec or ruggedized. These printers utilize thermal
printing, impact printing and laser printing technologies. These printers are
purchased and utilized by the DoD as well as by companies and organizations,
which manufacture, sell or use data processing or data communications systems
that require "hard copy" printouts. The Company's products are incorporated into
these systems. The military printers are more reliable than conventional
commercial printers and are designed to work in severe environmental
applications. The design and component selection allow the Company's printers to
withstand certain adverse effects of dirt and grime, corrosion, droppage,
bullets, moisture, extremes in hot and cold temperature, and in some cases,
nuclear radiation. In connection with the U.S. government military peripheral
standardization programs, the DoD has approved and assigned nomenclature
(military identification) to standard computer peripherals for its defense
systems. Several of the Company's printers have been included in this
standardization program, enabling the armed services to select the Company's
printers for new systems without incurring the expense of developing new printer
documentation for each system. The Company believes that the inclusion of the
Company's printers in this standardization program influenced the purchase of
its printers on several defense programs.
The Company's high-resolution thermal printers utilize a thermal direct
imaging method of printing. In the past, printers utilizing the thermal printing
process generally could not meet the specifications required in certain rigorous
environments. Due to technological improvements, thermal printers can now be
built to operate in adverse environments while providing quiet and reliable
printing operations. The Company has developed a low cost impact printer as well
as a ruggedized laser printer, which are targeted at the low end of the severe
environment market. These ruggedized products utilize commercial components,
some industrial (high-reliability, military rated) components, and are encased
in a rugged case to withstand moderately severe environments.
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The Company has experienced the highest sales volume of full mil-spec
printers with its DmC 1600 printer/plotter. These printers are used for the U.S.
Navy's Tactical Flag Command Center ("TFCC"). The TFCC system provides the hard
copy data utilized by the Fleet Commander when tactical decisions are required
during crisis situations. The TFCC system is proposed for most of the Navy's
nuclear super aircraft carriers and cruisers. In addition, the DmC 1600's are
used for the U.S. Navy standard display consoles that are utilized on virtually
every fighting ship in the fleet. This printer is qualified for the Navy's
rigorous environmental standards. A special version of the DmC 1600 printer is
being used for the U.S. Army REGENCY NET secure communications systems, the U.S.
Navy's on-board anti-submarine warfare training program, and the MILSTAR
Communications Satellite Program, the DoD's global communications system.
The Company's DmC 1900 Model, a high resolution color printer/plotter, also
is used by the U.S. Navy. This product line utilizes the thermal transfer
process to produce high-resolution, full color images on plain paper. The
thermal transfer technology used in the DmC Series 1900 differs from the direct
imaging thermal process in that it uses plain paper and a multi-colored ribbon
instead of direct imaging paper. These products provide between 40,000 and
90,000 pixels (picture elements) per square inch and up to 16,000,000 colors,
shades or tones. This printer is used by the U.S. Navy for utilization within a
number of Aegis subsystems. The military color printer market has been slow to
develop due to cost considerations; however, the Company has developed a new
lower cost ruggedized printer which it believes should enjoy higher sales.
RUGGEDIZED COMPUTERS. The Company's ruggedized products combine
environmental and mechanical engineering technology with computer technology to
produce products that perform identically to commercial counterparts, but are
able to operate in adverse environments. The Company offers ruggedized versions
of computer devices and peripherals encased in shock, vibration and temperature
resistant housing for products of equipment manufacturers such as Digital
Equipment Corporation ("DEC"), Hewlett-Packard Company, Silicon Graphics Inc.,
and Sun Microsystems Inc. This process often requires the Company to design and
manufacture cases, controls, backplanes and power supplies. These products
require much shorter development and testing periods than mil-spec products. As
such, these products allow the military to deploy state-of-the-art computer
technology rapidly, at a price greatly reduced from full mil-spec systems. These
timing and price factors are responsive to current U.S. government trends.
SIGNIFICANT CUSTOMERS AND MATTERS CONCERNING DOD BUSINESS
Most of the customers for the Company's products are the DoD and prime
contractors under programs funded by the DoD. For the fiscal years ended October
31, 1999 and October 25, 1998, direct and indirect DoD business represented
approximately 54% and 71%, respectively, of the Company's revenues. Because the
Company's products are intended to function as subsystems, they are sold to
customers which manufacture, sell or use data processing or data communication
systems which involve a processing, printing, recording or data entry function
for which the Company's products are suited. While the Company may be a
subcontractor on a government program with an aggregate budget of billions of
dollars extending over as much as a ten-year period, the Company's share of the
budget for any major program is relatively small.
In the fiscal year ended October 31, 1999, the Company's three largest
customers in sales, Computing Devices Canada - 36%, Lockheed Martin - 22% and
U.S. government - 11%, accounted for an aggregate of 69% of total Company sales.
The loss of any one of these customers could have a material adverse impact on
the results of operations and financial condition of the Company.
In the fiscal year ended October 25, 1998, the Company's three largest
customers in sales, U.S. government - 24%, Raytheon - 22% and Lockheed Martin -
19%, accounted for an aggregate of 65% of total Company sales.
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Companies that are engaged primarily in supplying equipment and services,
directly or indirectly, to the U.S. government are subject to special risks
including dependence on government appropriations, termination without cause,
contract renegotiation and competition for the available DoD business. Over the
past several years, the Company has been significantly impacted by market
changes in the DoD. DoD budget forecasts indicate that overall funding will
continue to decrease for the foreseeable future.
The Company's DoD related contracts provide for the right to audit the
Company's cost records and are subject to defective pricing regulation.
Management does not believe that it has any material exposure of this sort on
any such contracts. Accordingly, no provisions have been made in the Company's
accounts in connection with defective pricing regulation.
HIGH-SPEED COLOR DIGITAL PRINTER
In fiscal 1994, the Company began an intensive program to develop a
high-speed color digital printer for the short-run production printer market.
After significant development and marketing costs, coupled with limited market
success, the Company in October 1996 idled and subsequently ceased all
manufacture and marketing of its CYMax product line to permit a comprehensive
strategic and operational feasibility study of its overall concurrent transfer
imaging ("CTI") technology and its potential applications. Following the
completion of the strategic and operational feasibility study, the Company
introduced a new family of five industrial and government/defense high-speed
concurrent thermal transfer printers on July 21, 1997. The Company's new family
of medium and wide format printers includes the HARRIER (TM), the CONDOR (TM) I
and the CONDOR (TM) II for industrial customers, and the COBRA (TM) I and COBRA
(TM) II for government/defense customers.
The HARRIER (TM), CONDOR (TM) series and COBRA (TM) series of print engines
are robust, rugged, high-performance printers which incorporate a wide range of
Datametrics' newly-developed technological capabilities in the area of thermal
transfer printing.
On November 19, 1997, Datametrics announced a North American automobile
license plate partnership agreement with Avery Dennison Corporation to provide
Datametrics' state-of-the-art digital imaging system solution for the
manufacture of vehicular license plates. Under the terms of the agreement, Avery
Dennison, which manufactures reflective license plate sheeting, will market the
Company's new HARRIER (TM) single station industrial print engine and the CONDOR
(TM) I four station industrial print engine as part of a total system approach
to the manufacture of vehicular license plates. On June 1, 1998, the Company
notified Avery Dennison of the termination of this contract effective May 31,
1999.
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.
CERTAIN MARKET CONSIDERATIONS
The markets served by the Company are characterized by rapid technological
advances, downward price pressure in the marketplace as technologies mature,
changes in customer requirements and frequent new product introductions and
enhancements. The Company's business requires ongoing research and development
efforts and expenditures, and its future success will depend on its ability to
enhance its current products, reduce product costs and develop and introduce new
products that keep pace with technological developments in response to evolving
customer requirements. The Company's failure to anticipate or respond adequately
to technological developments could result in a loss of anticipated future
revenues and impair the Company's competitiveness.
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SERVICE
Pursuant to maintenance agreements, repair orders or warranty provisions,
the Company generally services its printers with its own employees at its
facility. In-house, non-warranty repairs and maintenance service provided 2.7%
and 3.3% of the Company's sales in fiscal 1999 and 1998, respectively. For both
military and commercial products, the Company's standard warranty period is
ninety days, although longer warranty periods are available at customer request
for an additional charge.
Sales of spare parts for the Company's products amounted to 24% and 18% of
fiscal 1999 and 1998 revenue, respectively. The Company also sells
documentation, such as handbooks, operational manuals, schematics and other
technical data to assist its customers in maintaining their own equipment.
BACKLOG
The Company's backlog of funded orders not yet recognized as revenue at
October 31, 1999 and October 25, 1998, was approximately $2,559,000 and
$5,083,000, respectively. More than 90% of the October 31, 1999 backlog is
expected to be delivered during the fiscal year ending October 29, 2000.
SOURCES OF SUPPLY
The Company is generally not dependent upon any one supplier for any raw
material or component which it purchases, and there are available alternative
sources for such raw materials and components. The Company is currently
dependent, however, on certain OEM suppliers for components used in its
ruggedized computer devices and peripherals. The Company has year-to-year
renewable supply agreements with these suppliers, which have been renewed in
prior years. In the event any of these contracts are not renewed, however, the
Company's business would be materially and adversely impacted because the
Company would have to purchase similar components upon substantially less
favorable terms and conditions.
COMPETITION
The Company competes in each of its target markets against other companies,
many of which have substantially greater financial, technical, marketing,
distribution and other resources than the Company. The principal competitive
factors in the markets in which the Company participates are image quality,
product performance and price.
INTELLECTUAL PROPERTY RIGHTS
It is the Company's policy to obtain appropriate proprietary rights
protection for any potentially significant new technology acquired or developed
by the Company. The Company has a trademark registration covering its "DmC" (R)
logo and for the Harrier (TM) and the Condor (TM) products. The Company has been
granted two U.S. patents relating to its high-speed color digital printer
technology. The Company also has several U.S. patent applications pending
relating to its high-speed color digital printer. There can be no assurance,
however, that any patents will be granted pursuant to these various applications
in the U.S. and abroad.
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In addition, the Company relies on copyright and trade secret laws to
protect its proprietary rights. The Company attempts to protect its trade
secrets and other proprietary information through agreements with customers and
suppliers, proprietary information agreements with the Company's employees and
consultants and other similar measures. There can be no assurance, however, that
the Company will be successful in protecting its trade secrets and other
proprietary information.
While management believes that the Company's trademarks, patents, patent
applications, and other proprietary know-how have significant value, changing
technology makes the Company's future success dependent principally upon its
employees' technical competence and creative skills for continuing innovation.
RESEARCH AND DEVELOPMENT ACTIVITIES
The Company is involved in both Company-sponsored and customer-sponsored
research and development. In the latter case, customers contract directly for
such activities. The customer-sponsored research and development primarily
consist of non-recurring engineering costs relating to production contracts. In
addition to design technology, this non-recurring engineering includes
development of maintenance and operator manuals, drawings, reliability and
maintainability analysis, technical design audits and data required to support
field repairs. Such costs do not qualify as research and development costs as
defined by Financial Accounting Standards Board Statement No. 2, and
accordingly, have not been disclosed as such in the Company's financial
statements.
EMPLOYEES
As of October 31, 1999, the Company employed 93 persons on a full-time
basis, compared to 87 persons on a full-time basis as of October 25, 1998. None
of the Company's employees are represented by a union or are subject to a
collective bargaining agreement. The Company believes that its relations with
its employees are good.
OTHER MATTERS
The business of the Company is not seasonal.
The Company's manufacturing operations are subject to various federal,
state and local laws, including those restricting or regulating the discharge of
materials into the environment, or otherwise relating to the protection of the
environment. The Company is not involved in any pending or threatened
proceedings which would require curtailment of, or otherwise restrict, its
operations because of such regulations, and compliance with applicable
environmental laws has not had a material adverse effect on the business,
financial condition or results of operations of the Company.
In December 1997, the Company purchased a 43,000 square foot facility in
Orlando, Florida for $899,000. In connection with the acquisition of this
property, the Company obtained a mortgage loan in the amount of $975,000, which
included approximately $76,000 to be used for building improvements. The Company
completed its move to Florida during February 1998.
ITEM 2. PROPERTIES.
The Company's operations are conducted from a 43,000 square foot
manufacturing facility in Orlando Florida, which the company purchased in
December 1997 (see Item 1. Other Matters). A 6,600 square foot facility located
in Calabasas, California was opened in November 1997. This facility houses the
Company's technology center. The lease is for a three-year term through October
2000. In April 1998, the Company leased a 5,400 square foot office in Florham
Park, New Jersey in which the Company's Corporate offices are located. The lease
provides for a five-year term through March 2003. Management believes that its
facilities are suitable and adequate for the Company's current needs.
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ITEM 3. 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 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, sought 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. The Former Officers sought damages
from the Company based upon the Severance Agreements and an alleged implied
promise not to terminate the employment of the Former Officers with the Company
without good cause.
On September 28, 1998, a California trial court upheld the enforcability of
the Former Officer's severence agreements and the officer's requested entry of a
judgment in the approximate amount of $1,200,000 plus interest and costs. The
Company appealed the judgment and in September 1999, the California Court of
Appeal reversed the judgment in favor of the Former Officers and awarded the
Company its costs on appeal. Later, the California Supreme Court denied the
Former Officers' petition for review of the appellate decision. The Company
intends to seek recovery of both its trial and appellate costs.
In April 1998, the owner of the Woodland Hills, CA, premises formerly
occupied by the Company sued for the balance of all rent due through the end of
the then existing lease agreement plus damages. In March 1999, the Company
entered into a Mutual Release and Settlement Agreement wherein the Company paid
of a total of $850,000 in cash and issued 150,000 shares of Common Stock to the
owner. The Company has agreed to register the shares of Common Stock, and under
certain circumstances, the Company will issue additional shares of Common Stock
to the extent that the market price of the Common Stock falls below certain
levels. The Company also has the right to repurchase the shares under certain
circumstances. Since the minimum amount guaranteed of $375,000 in Common Stock
by the Company exceeded the Market Value of the Common Stock issued by the
Company, the Common Stock has been valued at $2.50 per share for that
transaction.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
Datametrics Corporation's common stock has been listed on the American
Stock Exchange (Symbol DC) since July 26, 1988. The high and low sales prices
for the common stock as reported by the American Stock Exchange are set forth in
the following table.
Fiscal 1999 Quarter Ended High Low
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January 24.......................... $2 1/8 $ 15/16
April 25............................ $1 13/16 $1 1/8
July 25............................. $1 1/2 $ 13/16
October 31.......................... $1 15/16 $ 15/16
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Fiscal 1998 Quarter Ended....................... High Low
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January 25......................... $2 3/16 $2 1/16
April 26........................... $1 7/8 $1 7/8
July 26............................ $1 11/16 $1 5/8
October 25......................... $1 15/16 $ 3/4
There were approximately 766 stockholders of record as of October 31, 1999.
No cash dividends have been paid to common stockholders since the Company
was founded, and the Company does not intend to do so in the foreseeable future.
ITEM 6. 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 that
actual events or results may differ materially.
RESULTS OF OPERATIONS
Fiscal Year 1999 Compared With Fiscal Year 1998:
Sales for the year ended October 31, 1999 were $8,560,000, an increase of
$818,000 or 11% compared with sales of $7,742,000 in the prior fiscal year.
Sales for fiscal 1999 were favorably impacted by increased sales of spare parts.
Cost of sales for fiscal 1999 was $8,105,000 (95% of sales), an increase of
$2,535,000 or 46% compared with $5,570,000 (72% of sales) for the prior fiscal
year. In the current year, cost of sales was favorably impacted by lower direct
labor costs in the Company's Florida manufacturing operation compared to the
Company's former manufacturing operation in California which was offset by
higher general overhead costs. Cost of goods was materially higher as a result
of an increase in reserves to reflect the Company's announced plans to
discontinue and sell its military defense business. Additionally, fiscal 1999
inventory levels based on sales and usage were substantially below the projected
closing fiscal 1999 inventory balances. Such unanticipated differential has been
attributed to shrinkage, in the approximate amount of $1,000,000 which may have
been the result of theft, deterioration, loss, disposal, clerical error and
other factors in one or more periods. The Company has not determined which of
such factors, or to which extent each of such factors, contributed to the total
amount of shrinkage.
Selling, general and administrative ("SG&A") expenses as well as research
and development expenses for fiscal 1999 were $4,689,000 (55% of sales) a
decrease of $235,000 or 5%, compared with $4,924,000 (64% of sales) for the
prior fiscal year. The reduction in SG&A was the result of lower defense-related
marketing expenses and lower administrative and support staff expenses
throughout the Company. This reduction was partially offset by an increase in
professional fees for 1999.
Net interest expense amounted to $1,259,000 for the year ended October 31,
1999 compared with net interest expenses of $518,000 for the year ended October
25, 1998. This increase is due to higher outstanding borrowings.
The net loss for the year ended October 31, 1999 amounted to $6,718,000, an
increase of $3,448,000 compared with net loss of $3,270,000 for the prior fiscal
year.
Management has determined that, based on the Company's historical losses
from recurring operations, the Company will most likely not recognize its net
deferred tax assets at October 31, 1999. 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.
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The Company utilizes various computer software packages as tools in running
its accounting operations. Management replaced the existing Western Data Systems
software with a software package better suited to support its current and future
business needs. The new software is fully Y2K compliant.
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.
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.
Net cash used in operations was $5.2 and $5 million in 1999 and 1998,
respectively. The change from 1998 to 1999 was primarily due to a higher net
loss offset by a decrease in accounts and increase in accrued expenses.
Net cash used in investing activities was $0.1 million and $1.6 million in
1999 and 1998, respectively. The change from 1998 to 1999 was primarily the
result of reduced expenditures for property and equipment.
Net cash provided by financing activities was $5.2 million and $6.6 million
in 1999 and 1998 respectively. The change from 1998 to 1999 was primarily due to
decreased net proceeds from the issuance of common stock and warrants, long-term
debt and revolving line of credit.
Private placements through June 19, 1998 totaling 630,000 shares of Common
Stock at $1.25 to $1.75 per share resulted in proceeds to the Company of
approximately $879,000.
During July 1998, we completed the sale of an aggregate of $1,750,000 of 7%
Convertible Debentures to approximately 3 investors for an aggregate purchase
price of $1,750,000.
During December 1998, we completed the sale of an aggregate $3,450,000 of
10% Subordinated Note due 2000 to approximately 7 investors, in exchange for
$500,000 of our Senior Secured Subordinated Debentures and retirement of all
$1,750,000 of our 7% Convertible Debentures. The remaining $1,200,000 purchase
price was paid in cash. The 10% Subordinated Notes provide for issuance of
5-year warrants to purchase up to 845,760 Common Stock at $1.50 per share, and
5-year Closing Fee Warrants to purchase up to 1,229,800 of the Company's Common
Stock at $1.50 per share.
During December 1998, we also sold an aggregate 1,559,374 shares of Common
Stock at $1.00 per share to approximately 6 shareholders for an aggregate
purchase price of $1,559,374.
During March 1999, we sold an aggregate $400,000 of 10% Bridge notes due
May 1999 to approximately 5 investors for an aggregate purchase price of
$400,000. In connection with such sale, we also issued 5-year Warrants to
purchase up to an aggregate of 200,000 shares of the company's common Stock at a
purchase price of $1.00 per share.
During March 1999, we issued 150,000 share of Common Stock to The
Manufacturer's Life Insurance Company (U.S.A.) pursuant to a Mutual Release and
Settlement Agreement.
During May 1999, we sold an aggregate 1,500,000 shares of Common Stock at
$1.00 per share to 3 investors for an aggregate purchase price of $1,500,000.
The investors were also issued 5-year Warrants to purchase up to an aggregate
1,500,000 of the Company's Common Stock. We also issued 75,000 shares to a
broker in commection such sale.
During May 1999, we issued 104,348 shares of Common Stock to a service
provider as compensation for marketing services to be performed pursuant to a
Market Access Program Marketing Agreement. We also issued Warrants to purchase
up to 200,000 shares of our Common Stock to the service provider pursuant to
such marketing.
10
<PAGE>
During August 1999, we sold an aggregate $2,300,000 of Convertible
Subordinated Secured Notes due July 2000. A portion of the purchase price
included the exchange of $600,000 of our 10% Senior Secured Debentures then in
default and $150,000 of our outstanding 10% Bridge Notes. The remaining
$1,550,000 was paid in cash. We also issued Warrants to purchase up to 1,150,000
shares of Common Stock, for a purchase price of $1.10 per share.
In September 1999, we issued Warrants to purchase up to an aggregate
1,500,000 share of our Common Stock for a purchase price of $1.00 per share to
the guarantors of our line of credit with Branch Banking and Trust Company. We
also issued Warrants to purchase up to 75,000 shares of our Common Stock for a
purchase price of $1.10 per share to a third party in consideration of arranging
the guarantees.
The Company expects to finance its capital expenditure requirements and
other commitments with the proceeds from the various private placements,
subordinated notes and other sources of working capital.
The Company's liquidity and cash resources are significantly impaired by
ongoing losses and significant reductions in revenues. 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. We are having ongoing
discussions with investors about equity and/or subordinated 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 subordinated 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.
RECENT ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 requires companies to recognize all derivative contracts at their fair
values, as either assets or liabilities on the balance sheet. If certain
conditions are met, a derivative may be specifically designated as a hedge, the
objective of which is to match the timing of gain or loss recognition on the
hedging derivative with the recognition of (1) the changes in the fair value of
the hedged asset or liability that are attributable to the hedged risk, or (2)
the earnings effect of the hedged forecasted transaction. For a derivative not
designated as a hedging instrument, the gain or loss is recognized in income in
the period of change, SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999.
Historically, the Company has not entered into derivative contracts
either to hedge existing risks or for speculative purposes. Accordingly, the
Company does not expect adoption of the new standard to effect its financial
statements.
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 has been 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.
ITEM 7. SELECTED FINANCIAL DATA.
The following financial statements are included as a separate section
following the signature page to this Form 10-KSB:
11
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Financial Statements
Report of BDO Seidman, LLP, Independent Certified Public Accountants...................................... F-2
Consolidated Balance Sheet as of October 31, 1999......................................................... F-3
Consolidated Statements of Operations for the fiscal years ended October 31, 1999 and October 25, 1998... F-4
Consolidated Statements of Stockholders' Equity for the fiscal years ended October 31, 1999 and
October 25, 1998 .................................................................................... F-5
Consolidated Statements of Cash Flows for the fiscal years ended October 31, 1999 and October 25, 1998.... F-6
Notes to Consolidated Financial Statements................................................................ F-7
</TABLE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On November 3, 1997, the Company changed its certifying accountants from
Ernst & Young LLP to Deloitte & Touche LLP as filed on Form 8-K on November 7,
1997.
On February 18, 1998, the Company's certifying accountants, Deloitte &
Touche LLP, resigned as reported in the Company's Current Report on Form 8-K
filed with the Securities and Exchange Commission on February 25, 1998. The
Company had disagreements with its certifying accountants concerning the
classification of certain inventoried parts as long-term and the Company's
ability to continue as a going concern.
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.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding Directors and Executive Officers of the
Registrant will appear in the proxy statement for the 2000 Annual Meeting of
Stockholders or an amendment to this Form 10-KSB, and is incorporated herein by
reference.
ITEM 10. EXECUTIVE COMPENSATION
Information regarding Executive Compensation will appear in the proxy
statement for the 2000 Annual Meeting of Stockholders or an amendment to this
Form 10-KSB, and is incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding Security Ownership of Certain Beneficial Owners
and Management will appear in the proxy statement for the 2000 Annual Meeting of
Stockholders or an amendment to this Form 10-KSB, and is incorporated herein by
reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding Certain Relationships and Related Transactions
will appear in the proxy statement for the 2000 Annual Meeting of Stockholders
or an amendment to this Form 10-KSB, and is incorporated by this reference.
12
<PAGE>
ITEM 13. EXHIBITS LIST AND REPORTS ON FORM 8-K.
(a) Exhibits
The exhibits listed in the accompanying Exhibit Index on pages E-1 to E-4
hereof are filed as part of this report. (See Item 7 above regarding Index to
Consolidated Financial Statements and Financial Statement Schedules.)
(b) Reports on Form 8-K
The following reports on Form 8-K were filed during the last fiscal quarter
of the period covered by this report (No financial statements were filed as a
part thereof):
1. Report on Form 8-K dated August 2, 1999, relating to the sale of an
aggregate $2,300,000 of 12% Subordinated Convertable Secured Notes.
2. Report on Form 8-K dated September 4, 1999, relating to the
establishment of a $1,500,000 revolving line of credit with Branch
Banking and Trust Company.
3. Report on Form 8-K dated September 30, 1999, relating to the cessation
of the employment of Mr. William Pandos as Chief Financial Officer and
Treasurer.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of Florham
Park, State of New Jersey, on the 14th day of February, 2000.
DATAMETRICS CORPORATION
(Registrant)
/S/ DANIEL P. GINNS
-----------------------
Daniel P. Ginns,
Chief Executive Officer
Pursuant to the requirements of the Securities 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:
Signature Title Date
/s/ Daniel P. Ginns Chairman of the Board, February 14, 2000
- - ------------------------ Chief Executive Officer
Daniel P. Ginns and Director Principal
Executive Officer and
Principal Financial and
Accounting Officer
/s/ Vincent Cahill Director February 14, 2000
- - -------------------------
Vincent Cahill
/s/ Douglas Friedenberg Director February 14, 2000
- - -------------------------
Douglas Friedenberg
14
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
Form 10-KSB
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Financial Statements
Report of BDO Seidman, LLP, Independent Certified Public Accountants...................................... F-2
Consolidated Balance Sheet as of October 31, 1999......................................................... F-3
Consolidated Statements of Operations for the fiscal years ended October 31, 1999 and October 25, 1998... F-4
Consolidated Statements of Stockholders' Equity for the fiscal years ended October 31, 1999 and
October 25, 1998 .................................................................................... F-5
Consolidated Statements of Cash Flows for the fiscal years ended October 31, 1999 and October 25, 1998.... F-6
Notes to Consolidated Financial Statements................................................................ F-7
Financial Statement Schedule
Report of BDO Seidman, LLP, Independent Certified Public Accountants...................................... F-20
II-Valuation and Qualifying Accounts...................................................................... F-21
</TABLE>
All other schedules have been omitted since the required information is not
presented in amounts sufficient to require submission of the schedule, or
because the information required is included in the Consolidated Financial
Statements and related notes.
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Datametrics Corporation
We have audited the accompanying consolidated balance sheet of Datametrics
Corporation and Subsidiaries as of October 31, 1999, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the fiscal years ended October 31, 1999 and October 25, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly, in
all material respects, the consolidated financial position of Datametrics
Corporation and Subsidiaries at October 31, 1999, and the results of their
operations and their cash flows for the years ended October 31, 1999 and October
25, 1998 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company continues to experience losses from
operations. This raises substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regards to these matters are
also described in Note 2. The accompanying financial statements do not include
any adjustments relating to the recoverability and classification of recorded
asset amounts or the amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
/s/ BDO SEIDMAN, LLP
New York, New York
January 25, 2000
F-2
<PAGE>
DATAMETRICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
October 31,
1999
(In thousands, except for share data)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 137
Accounts receivable, net of allowance for possible losses of $50
(Notes 1 and 6)..................................................... 2,391
Inventories, net (Notes 3,4 and 6).................................. 3,403
Prepaid expenses and other current assets (Note 10)................. 961
--------
Total current assets......................................... 6,892
--------
Property and equipment, at cost:
Land (Note 7)....................................................... 420
Building and improvements(Note 7)................................... 1,042
Machinery and equipment............................................. 3,324
Furniture, fixtures and computer equipment.......................... 2,623
Leasehold improvements.............................................. 86
--------
7,495
Less: Accumulated depreciation and amortization..................... (5,519)
---------
Net property and equipment.................................. 1,976
Inventories, net (Notes 3,4 and 6).................................. 2,539
Other assets (Notes 8 and 10)....................................... 1,220
--------
$12,627
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving line of credit (Note 6)................................... $1,451
Current maturities of long-term debt (Note 7)....................... 2,369
Accounts payable.................................................... 939
Other accrued expenses.............................................. 505
--------
Total current liabilities...................................... 5,264
Long-term debt, less current maturities (Note 7).................... 4,446
Loan payable (Note 8)............................................... 800
--------
Total liabilities.................................................... 10,510
--------
Commitments and contingencies (Notes 9 and 11)
Stockholders' equity (Notes 7 and 10):
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.......................................... 42,703
Accumulated deficit................................................. (40,776)
---------
Total stockholders' equity........................................ 2,117
---------
$12,627
=========
</TABLE>
See accompanying notes.
F-3
<PAGE>
DATAMETRICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Years Ended
October 31, October 25,
1999 1998
----------- -----------
(In thousands, except per share data)
Sales (Note 1).......................................... $8,560 $7,742
Cost of sales (Note 3)............................... 8,105 5,570
Selling, general and administrative.................. 4,689 4,924
Lease settlement expense (Note 11)................... 1,225 -
------ ------
Loss from operations................................. (5,459) (2,752)
Interest expense, net (Note 10)........................ (1,259) (518)
-------- -------
Net loss $(6,718) $(3,270)
======== ========
Loss per share of common stock:
Basic and diluted.................................... $(0.38) $ (0.22)
======= ========
Weighted Average Number of Shares Outstanding:
Basic and diluted.................................... 17,773 15,202
======= ======
See accompanying notes.
F-4
<PAGE>
DATAMETRICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
------------ Additional Total
Number of Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C>
Balances at October 26, 1997 13,283,168 $133 $34,177 $(30,788) $3,522
Issuance of common stock and
warrants, net of issuance costs 2,280,337 23 3,733 - 3,756
Net loss ----- ----- ----- (3,270) (3,270)
---------- ------- -------- --------- --------
Balances at October 25, 1998 15,563,505 156 37,910 (34,058) 4,008
Issuance of common stock and
warrants, Net of issuance costs 3,283,722 32 3,172 ---- 3,204
Issuance of common stock
relating to legal settlement 150,000 2 373 - 375
Value of warrants issued in
connection with debt placement ---- ---- 1,248 ---- 1,248
Net loss
---- ---- ---- (6,718) (6,718)
---------- ------ ------- ------- -------
Balances at October 31, 1999 18,997,227 $190 $42,703 $(40,776) $2,117
========== ==== ======= ========= ======
</TABLE>
See accompanying notes.
F-5
<PAGE>
DATAMETRICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended
------------------
October 31, October 25,
1999 1998
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $(6,718) $(3,270)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash interest and financing costs 416 -----
Non-cash charges related to settlement of litigation 375 -----
Depreciation and amortization 419 490
loss on disposal of assets ----- (3)
Changes in assets and liabilities:
Accounts receivable (412) 896
Inventories 1,398 1,344
Prepaid expenses and other current assets (423) 118
Other assets (61) 261
Accounts payable (94) (609)
Accrued expenses (70) (1,062)
Advance and progress payments from customers ----- (133)-
Other long-term liabilities ----- (323)
----- -----
Net cash used in operating activities (5,170) (4,979)
------- -------
Cash Flows from Investing Activities:
Capital expenditures for property and equipment (88) (1,574)
Proceeds from sale of fixed assets --- 11
--- --
Net cash used in investing activities (88) (1,563)
---- -------
Cash Flows from Financing Activities:
Borrowings on revolving line of credit 1,877 8,310
Payments on revolving line of credit (2,095) (7,633)
Increase (decrease) in other current liabilities --- (500)
Payments on capitalized lease obligations --- (6)
Borrowings on long-term debt 3,150 2,717
Payments on long-term debt (1,022) (124)
Borrowings on loan payable 54 50
Proceeds from the issuance of common stock and warrants 3,203 3,756
----- -----
Net cash provided by financing activities 5,167 6,570
----- -----
Net increase (decrease) in cash and cash equivalents (91) 28
Cash and cash equivalents at beginning of the year 228 200
--- ---
Cash and cash equivalents at end of the year $ 137 $ 228
====== =====
Supplemental Disclosures of Cash Flow Information:
Interest paid, net $ 776 $ 512
Income paid taxes 3 7
</TABLE>
See accompanying notes.
F-6
<PAGE>
DATAMETRICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Datametrics Corporation, a Delaware corporation, is engaged primarily in
the design, development, manufacture and sale of high-speed, non-impact
printers; high-resolution, non-impact printer/plotters; and ruggedized computers
and computer workstations.
BASIS OF PRESENTATION AND CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Datametrics Corporation and subsidiaries (collectively, the "Company"). All
significant intercompany accounts and transactions have been eliminated in
consolidation. The Company's fiscal year end is the last Sunday of each October.
REVENUE RECOGNITION
The Company recognizes revenue on the sale of product and parts when
shipped.
The Company provides an accrual for future warranty costs at the time of
revenue recognition based upon the relationship of prior year sales to actual
warranty costs. The warranty for the Company's products generally covers defects
in material and workmanship. The current accrual represents the average
outstanding warranty of approximately ninety days.
CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS
As is customary in the industry, the Company grants uncollateralized credit
to its clients, which include the U.S. government and large multi-national
corporations operating in a broad range of industries. In order to mitigate its
credit risk, the Company continually evaluates the credit worthiness of its
major commercial clients, and maintains allowances for potential losses within
management expectations.
Approximately 54% and 71% of the Company's sales during fiscal years 1999
and 1998, respectively, were to various U.S. government agencies under prime
contracts or to prime contractors having sales to such agencies. Export sales to
foreign customers amounted to $3,151,000 ($3,069,000 to Canada) or 37% of total
sales in fiscal year 1999. Export sales in 1998 were immaterial. The Company's
three largest customers accounted for 36%, 22% and 11% of the Company's sales
for the fiscal year ended October 31, 1999. Its three largest customers
accounted for 24%, 22% and 19% of the Company's sales for the fiscal year ended
October 25, 1998. Accounts receivable from these customers represented 74% of
accounts receivables at October 31, 1999.
F-7
<PAGE>
DATAMETRICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CASH AND CASH EQUIVALENTS
The Company considers securities purchased within three months of their
date of maturity to be cash equivalents.
INVENTORIES
Inventories, which primarily include purchased parts and subassemblies, are
stated at the lower of cost (first-in, first-out) or market. Contract inventory
costs include purchased materials, direct labor and manufacturing overhead. The
portion of inventories not expected to be sold within one year are classified as
noncurrent assets.
PROPERTY AND EQUIPMENT
Depreciation and amortization of property and equipment are provided using
the straight-line method over the following estimated useful lives:
Building and improvements.................. 39 years
Machinery and equipment.................... 2 to 5 years
Furniture, fixtures and computer equipment. 2 to 8 years
Leasehold improvements..................... Shorter of the remaining term of
the lease or the life of the asset
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The more significant estimates affecting amounts reported in
the financial statements relate to revenues and costs under long-term contracts
and inventory reserve accruals. Actual results could differ from those
estimates.
LOSS PER SHARE
Basic loss per share includes no dilution and is computed by dividing loss
available to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted loss per share reflect, in periods in which
they have a dilutive effect, the effect of common shares issuable upon exercise
of stock options. The effect of common stock equivalents has been excluded from
the diluted calculation since the effect would be antidilutive.
F-8
<PAGE>
DATAMETRICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying value of an asset may not be
recoverable. If the estimated future cash flows (undiscounted and without
interest charges) from the use of an asset are less than the carrying value, a
write-down would be recorded to reduce the related asset to its estimated fair
value.
INCOME TAXES
Income taxes are calculated using the liability method specified by SFAS
No. 109, "Accounting for Income Taxes". SFAS No.109 requires a company to
recognize deferred tax liabilities and assets for the expected future tax
consequences of events that have been recognized in a company's financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial statement
carrying amounts and tax basis of assets and liabilities using enacted tax rates
in effect in the years in which the differences are expected to reverse.
Deferred tax assets are reduced by a valuation allowance to the extent
realization is uncertain.
RECLASSIFICATIONS
Certain reclassifications were made to 1998 balances to conform with 1999
presentation.
RECENT ACCOUNTING STANDARDS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires companies to
recognize all derivative contracts at their fair values, as either assets or
liabilities on the balance sheet. If certain conditions are met, a derivative
may be specifically designated as a hedge, the objective of which is to match
the timing of gain or loss recognition on the hedged derivative with the
recognition of (1) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk, or (2) the earnings effect
of the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized in income in the period of
change. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999.
Historically, the Company has not entered into derivative contracts either
to hedge existing risks or for speculative purposes. The adoption of this new
standard did not have an effect on the Financial Statements.
F-9
<PAGE>
DATAMETRICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 2. GOING CONCERN
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company has continued to
incur significant losses from operations resulting primarily from a decline in
the Company's military business, and this raises substantial doubt about its
ability to continue as a going concern.
The Company is planning to take steps necessary to enable the Company
to continue as a going concern. As discussed in Note 3, the Company is
discontinuing its military business and is planning to sell all related
inventory, customer lists and manfacturing drawings and specifications. In
connection with this, the Company has implemented cost cutting measures
including significant employee reductions.
The Company has also separately incorporated MadeMyWay.Com(TM), an
Internet-based company which uses the Company's printer technology to
manufacture apparel, textile and specialty items. Although the Company believes
that MadeMyWay.com(TM) will be successful given the Company's superior printer
technology, variety of offerings and quick fulfillment time, there can be no
assurances that this company will be successful or profitable. The Company is
also seeking additional financing to assist the Company with its launch of
MadeMyWay.com(TM) and for general working capital purposes. There can be no
assurance that the Company will be successful in these efforts.
The Company's continuation as a going concern is dependent on its
ability to successfully implement its cost cutting measures, increase revenues
from its industrial printer business and the newly formed MadeMyWay.com(TM), and
raise additional financing. The accompanying financial statements do not include
any adjustments that may result from the Company's inability to continue as a
going concern.
NOTE 3. SALE OF THE MILITARY BUSINESS
Subsequent to year-end, the Company's Board of Directors approved the
sale of the Company's military business due to its continued poor performance.
The Company will seek to sell the entire inventory, customer lists and
manufacturing drawings and specifications related to this line of business. In
connection with this pending sale, the Company incurred a write down of its
military inventory of approximately $2 million as of October 31,1999, which has
been included in cost of sales. The Company anticipates that the sale should be
completed within the next fiscal year.
F-10
<PAGE>
DATAMETRICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4. INVENTORIES
Inventories consist of the following:
1999
----
(In thousands)
Stockroom inventories......................................... $10,821
Work in process............................................... 621
---------
.................................................... 11,442
Less inventories classified as non-current asset.............. (2,539)
Less reserve for obsolescence................................. (5,500)
-------
$3,403
======
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 including parts which may be used
in the Company's bailment program for its high-speed color printers are
classified as a non-current asset. The Company does not amortize its non-current
inventory, rather the Company evaluates all inventory for obsolescence on a
periodic basis and records estimated reserves.
F-11
<PAGE>
DATAMETRICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 5. INCOME TAXES
The primary components of the Company's net deferred income tax assets are
as follows:
1999
----
(In thousands)
Net operating loss carryforwards............................. $14,486
General business credit carryforwards........................ 372
Other non-deductible accruals and allowances................. 2,391
---------
Total deferred income tax assets........................ 17,249
Valuation allowance for deferred income tax assets........... (17,249)
--------
Net deferred income tax assets............................... $ -------
=========
Net operating loss and tax credit carryforwards of approximately $37
million for federal income tax purposes will expire at various times between
2010 and 2018.
The provision for income taxes is composed of the following:
1999 1998
---- ----
(In thousands)
Current:
Federal $---- $----
State $---- $ ---
Deferred:
Federal (2,026) (1,105)
State (357) (188)
Increase in valuation allowance 2,383 1,293
----- -----
$---- $ ---
===== =====
F-12
<PAGE>
DATAMETRICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Based upon management's judgment and the continued losses incurred by the
Company, the valuation allowance represents 100% of the Company's net deferred
income tax assets. The following is a reconciliation of the difference between
the actual provision for income taxes and the provision computed by applying the
federal statutory tax rate on loss before income taxes:
1999 1998
---- ----
(In thousands)
Federal income tax benefit computed at statutory rate..... $(2,284) $(1,109)
State income tax benefit, net of federal benefits......... (335) (195)
Change in valuation allowance............................. 2,383 1,293
Other, net................................................ 236 11
-------- --------
$ --- $ ---
======== =========
NOTE 6. REVOLVING LINE OF CREDIT
In September 1999, the Company entered into a $1,500,000 revolving line of
credit with Branch Banking and Trust Company ("Branch Bank"). The Line of Credit
accrues interest at a variable rate equal to Branch Bank's Prime Rate plus 0.5%
(8.75% at October 31, 1999). The Line of Credit is secured by accounts
receivable and inventory of the Company and guarantees by two guarantors in the
aggregate amount of $1,500,000 ("Guarantees") that are secured by letters of
credit issued on the accounts of each of the guarantors. In consideration of the
Guarantees, the guarantors received Warrants to purchase up to an aggregate
1,500,000 shares of the Common Stock of the Company, $.01 par value, for a
purchase price of $1.00 per share, pursuant to an arrangement made in July 1999.
The Company also issued Warrants to purchase up to 75,000 shares of the Common
Stock of the Company for a purchase price of $1.10 per share to a third party as
compensation for arranging the Guarantees. The Line of Credit expires on August
25, 2000.
NOTE 7. LONG-TERM DEBT
Long-term debt consists of the following:
1999
----
(In thousands)
Mortgage SouthTrust Bank(a) ................................ $945
Subordinated Notes (b)....................................... 3,524
Subordinated Convertible Notes (c)........................... 2,346
Less current maturities of long-term debt.................... (2,369)
-------
$4,446
======
F-13
<PAGE>
DATAMETRICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(a) In December 1997, the Company purchased a 43,000 square foot facility in
Orlando, Florida for $899,000. In connection with the acquisition of this
property, the Company obtained a mortgage loan in the amount of $975,000
from SouthTrust Bank. The loan matures on March 9, 2008. Interest is based
on 8.02% per annum through March 9, 2003 and is then adjusted to equal
2.25% in excess of the weekly average yield on United States Treasury Notes
adjusted to a constant maturity of five years as made available by the
Federal Reserve Board.
Maturities of the mortgage loan debt at October 31, 1999 are as follows:
(In thousands)
2000................................... $23
2001................................... 24
2002................................... 26
2003................................... 29
2004................................... 32
Thereafter............................. 811
---
Total Maturities ...................... 945
Less: Current maturities of long term debt 23
--
$922
====
(b) In December 1998, the Company closed a private placement of approximately
$3.45 million of 10% Subordinated Notes due in December 2000 (the
"Subordinated Notes") and $1.55 million in shares of the Company's common
stock. The Subordinated Notes, which are unsecured and callable under
certain conditions, provide for the Company to issue 5-year warrants
exercisable into the Company's common stock at a price of $1.50 per share.
As part of the offering, investors holding $1.75 million of the Company's
Convertible Debentures issued earlier in the year exchanged their holdings
for new 10% Subordinated Notes. In addition, holders of $500,000 of the
Company's Senior Subordinated Debentures also exchanged their Debentures
for the new 10% Subordinated Notes. The net proceeds of approximately $2.75
million from the sale of Subordinated Notes and common stock were used for
debt retirement and working capital purposes.
(c) In August 1999, the Company closed a private placement of approximately
$2.3 million of 12% Subordinated Convertible Secured Notes due in August
2000 (the "Subordinated Convertible Notes"). The Subordinated Convertible
Notes, which are callable under certain conditions, provide for the Company
to issue 5-year warrants exercisable into the Company's common stock at a
price of $1.10 per share. As part of the offering, investors holding
$150,000 of the Company's Bridge Notes issued earlier in the year and
holder of $600,000 of the Company's Senior Subordinated Debentures
exchanged their holdings for the new Subordinated Convertible Notes. The
net proceeds of approximately $1.55 million from the sale of Subordinated
Convertible Notes were used for working capital purposes.
NOTE 8. LOAN PAYABLE
During 1999, the Company borrowed $54,000 against the cash surrender value
of its key-man life insurance policy. At October 31, 1999, the balance owed,
which approximates the cash surrender value included in other assets, was
$800,217 at 7.8% per annum.
F-14
<PAGE>
DATAMETRICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 9. LEASES
The Company currently leases its facilities and various equipment under
operating leases. The building leases expire through 2004 and the equipment
leases expire through 2003. Minimum future rental commitments under
noncancelable operating leases are as follows:
(In thousands)
2000.......................... $324
2001.......................... 211
2002.......................... 162
2003.......................... 50
-----
$747
Rental expenses charged to operations were $320,000,and $321,000 for
the fiscal years 1999 and 1998, respectively.
F-15
<PAGE>
DATAMETRICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 10. STOCK OPTION PLANS AND WARRANTS
STOCK OPTIONS
The Company has several stock option plans which provide for the granting
of options to employees or directors at prices and terms as determined by the
Board of Directors. Such options vest over a period of one to four years. All
options issued by the Company to date have exercise prices which were equal to
the market value of the Company's common stock at the date of grant.
The following table sets forth summarized information concerning the
Company's stock options:
<TABLE>
<CAPTION>
Number of Exercise
Shares Price Range
------ -----------
(In thousands)
<S> <C> <C>
Options outstanding for shares of common stock at
October 26, 1997........................................................... 194 $1.2500-7.8750
Granted.................................................................... 85 $1.8150
Canceled or expired........................................................ (38) $1.2500-7.8750
Exercised.................................................................. --- ---
--- -------
Options outstanding for shares of common stock at
October 25, 1998........................................................... 241 $1.2500-7.8750
Granted.................................................................... --- ---
Canceled or expired........................................................ (50) $1.2500-2.8750
Exercised.................................................................. --- ---
Options outstanding for shares of common stock at October 31, 1999 191 $1.2500-7.8750
=== ==============
Shares reserved for issuance at October 31, 1999................................. 1,534
=====
Weighted average option exercise price information was as follows:
1999 1998
-------- --------
Outstanding at beginning of year............................................ $ 1.90 $2.47
Granted during the year..................................................... --- .82
Exercised during the year................................................... --- ---
Canceled, terminated and expired............................................ $1.58 $2.23
Exercisable at year end..................................................... $2.19 $2.02
</TABLE>
F-16
<PAGE>
DATAMETRICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Significant option groups outstanding at October 31, 1999 and related
weighted average price and life information were as follows:
<TABLE>
<CAPTION>
Weighted Average Weighted Number Weighted
Number Outstanding Remaining Average Exercise Exercisable(In Average
Exercise Price Range (In thousands) Contractual Life Price thousands) Exercise Price
- - -------------------- ------------------ ---------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$1.2500 60 0.94 $1.2500 45 $1.2500
$1.500 32 1.42 $.5000 20 $1.5000
$5.7500-$7.8750 14 0.89 $7.2679 13 $7.2395
$1.8150 85 2.51 $1.8150 32 $1.8150
191 1.72 $1.9857 110 $2.1877
=== ===
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting For Stock Issued To Employees," and selected interpretations in
accounting for its stock-based compensation plans. Accordingly, as all options
and warrants have been granted at exercise prices equal to fair market value on
the date of grant, no compensation expense has been recognized by the Company in
connection with its stock-based compensation plans. Had compensation cost for
the stock options and warrants been determined based upon the fair value at the
grant date for awards under these plans consistent with the methodology
prescribed under SFAS No. 123, "Accounting For Stock-Based Compensation," the
Company's net loss and loss per share for the year ended October 25, 1998 would
have been increased by approximately $199,000 and $.01 per share. There were no
warrants or options granted to employees for the year ended October 31, 1999.
The weighted average fair value of the options and warrants granted during 1998
is estimated at $.65 on the date of grant (using Black-Scholes option pricing
model) with the following weighted average assumptions for 1998: volatility of
46.5%, risk-free interest rate of 6.20%, and an expected life of two to five
years.
WARRANTS
There are 200,000 shares of common stock reserved for issuance upon
exercise of warrants sold for $0.001 per warrant to the underwriters of the
Company's June 21, 1995 offering of common stock. The warrants are exercisable
for a period of five years beginning June 21, 1996 and have a per-share exercise
price equal to $9.60 (120% of the initial public offering price of $8.00). There
were 616,679 shares of common stock reserved for issuance upon exercise of
warrants issued in conjunction with the Company's November 25, 1996 Senior
Subordinated Debt Offering. The warrants are exercisable for a period of five
years beginning November 25, 1996 and have a per-share exercise price of $1.50.
There were 337,000 warrants outstanding at October 31, 1999. There are 200,000
shares of common stock reserved for issuance upon exercise of warrants issued in
conjunction with a commitment to raise up to $3,000,000 in capital for the
Company. The warrants are exercisable for a period of five years beginning
February 5, 1997 and have a per-share exercise price of $2.00. There is
1,250,000 shares of common stock reserved for issuance upon exercise of warrants
issued to one executive officer issued in conjunction with his employment
agreement (see Note 11) and to a former officer of the Company. The warrants are
exercisable for a period of five years beginning November 13, 1996 and have a
per-share exercise price of $ 2.00.
During fiscal 1999, the Company issued approximately 7.2 million
warrants, all of which were still outstanding at October 31, 1999, in connection
with various debt and stock placements. The weighted average exercise price was
$1.10 and the weighted average warrant life was five years. The fair value of
the warrants were determined using the Black-Scholes option pricing model. The
weighted average assumptions were as follows: volatility of 45.8%, risk free
rate of 5.63% and an expected life of one year. The fair value of the warrants
issued in connection with debt was treated as original issue discount ("OID"),
are included in prepaid expenses and other assets and are being amortized over
the life of the related debt. For the year ended October 31, 1999, approximately
$416,000 was charged to interest expense relating to the amortization of OID.
F-17
<PAGE>
DATAMETRICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 11. COMMITMENTS AND CONTINGENCIES
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with its executive
officer/director, which expires December 31, 2002. The agreement automatically
renews on an annual basis unless notified by July 1. Such agreement provides for
minimum salary levels, adjusted annually for cost-of-living changes, as well as
for incentive bonuses which are payable if specified management goals are
attained. The aggregate commitment for future salaries at October 31, 1999,
excluding bonuses, was approximately $854,000. This agreement also provides
severance pay benefits upon termination of the executive's employment with the
Company as follows:
(a) Company-Initiated Termination Without Cause - the executive
shall be entitled to one payment of the Base Salary for a
period equal to the greater of (i) one year from the date of
termination, or the remainder of the employment term; and (ii)
the Company shall continue to provide the executive and the
members of the executive's immediate family all benefits
provided by the employment agreement. If any of these benefits
terminate by operation of law, the Company will reimburse the
executive for the costs of replacing those benefits for the
remainder of such period. As security for all of the Company's
obligations to make any payments to the executive, the Company
granted to the executive a subordinated security interest in
all assets of the Company now owned or hereafter acquired.
(b) Company-Initiated Termination in Connection with a Change in
Control-the executive shall be entitled to a cash payment
equal to the lesser of three years' base salary or the maximum
amount which would not result in any portion of the payment
being subject to the excise tax under Section 4999 of the
Internal Revenue Code. "Change in Control" shall mean: (i) a
merger or consolidation in which the Company is not the
surviving corporation; (ii) a reverse merger; or (iii) the
acquisition by any person, entity or group within the meaning
of Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended, of the beneficial ownership of securities of
the Company representing at least fifty percent of the
combined voting power entitled to vote in the election of
directors.
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 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, sought 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
sought damages from the Company based upon the Severance Agreements and an
alleged implied promise not to terminate the employment of the Former Officers
with the Company without good cause.
On September 28, 1998, a California trial court upheld the
enforceability of the Former Officers' Severance Agreements and the Former
Officers' requested entry of a judgment in the approximate amount of $1,200,000
plus interest and costs. The Company has appealed the judgment and in September
1999, the California Court of Appeal reversed the judgment in favor of the
Former Officers and awarded the Company its costs on appeal. In addition, the
California Supreme Court denied the Former Officers' petition for review of the
appellate decision. The Company intends to seek recovery of both its trial and
appellate costs.
F-18
<PAGE>
DATAMETRICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In April 1998, the owner of the premises the Company formerly leased in Woodland
Hills, California, sued the Company for the balance of all rent due through the
end of the then existing lease agreement plus damages. In March 1999, the
Company entered into a Mutual Release and Settlement Agreement wherein the
Company paid a total of $850,000 in cash and issued 150,000 shares of Common
Stock to the owner. The Company has agreed to register the shares of Common
Stock, and under certain circumstances, the Company will issue additional shares
of Common Stock to the extent that the market price of its Common Stock falls
below certain levels. The Company also has the right to repurchase the shares
under certain circumstances. Since the minimum amount guaranteed of $375,000 in
common stock by the Company exceeded the market value of the common stock issued
by the Company, the Common Stock has been valued at $2.50 per share.
F-19
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Datametrics Corporation
The audits referred to in our report dated January 25, 2000 relating to the
consolidated financial statements of Datametrics Corporation and subsidiaries,
(which report contained an explanatory paragraph regarding the Company's
inability to continue as a going concern), which is contained in Item 7 of Form
10-KSB, included the audits of the financial statement schedule listed in the
accompanying index for the years ended October 31, 1999 and October 25, 1998.
The financial statement schedule is the responsibility of management. Our
responsibility is to express an opinion on the financial statement schedule
based upon our audits.
In our opinion, such financial statement schedule presents fairly, in all
material respects, the information set forth therein.
BDO Seidman, LLP
New York, New York
January 25, 2000
F-20
<PAGE>
DATAMETRICS CORPORATION AND SUBSIDIARIES
SCHEDULE II Valuation And Qualifying Accounts
For The Years Ended
October 31, 1999 and October 25, 1998
<TABLE>
<CAPTION>
Classification 1999 1998
- - -------------- ---- ---
(In Thousands)
<S> <C> <C>
Reserve for possible losses:
Balance at beginning of period $ 195 $ 48
Add-provision charged to operations 147 -
Less-recovery of bad debt - -
Less-reserve applied during the year (145) -
-------- -------
Balance at end of period $ 50 $ 195
======= =======
Reserve for inventory obsolescence:
Balance at beginning of period $ 4,828 $ 4,222
Add-provision charged to operations 2,000 985
Less-reserve applied during the year (1,328) (379)
------- -------
Balance at end of period $5,500 $ 4,828
====== =======
Valuation allowances for deferred income tax assets:
Balance at beginning of period $14,866 $13,573
Add-provision charged to operations 2,383 1,293
----- -------
Balance at end of period $17,249 $14,866
======= =======
</TABLE>
F-21
<PAGE>
DATAMETRICS COPORATION
10-KSB for fiscal year ended October 31, 1999
EXHIBIT LIST and DESCRIPTION OF EXHIBITS
- - --------------------------------------------------------------------------------
Exhibit No. Description
3.1 Restated Certificate of Incorporation, as currently in
effect (incorporated by reference to Exhibit 3.1 to the
Registrant's Form 8-K dated April 15, 1987).
3.2 Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of Series
B Preferred Stock and Qualifications, Limitations and
Restrictions Thereof dated August 10, 1993 (incorporated
by reference to Exhibit 4.1 to Registrant's Form 8-K dated
August 10, 1993).
3.3 Bylaws as currently in effect (incorporated by reference
to Exhibit 3.2 to Registrant's Form 10-K for the year
ended October 28, 1990).
3.4 First Amendment to the Restated Bylaws, dated August 6,
1996 (incorporated by reference to Exhibit 3.0 to the
Registrant's Form 8-K dated August 6, 1996).
4.1 Warrant issued to Daniel P. Ginns, dated November 13, 1996
(incorporated by reference to Exhibit 4.1 to the
Registrant's Form SB-2/A dated September 17, 1999).
4.2 Warrant issued to Adrien A. Maught, Jr., dated November
13, 1996 (incorporated by reference to Exhibit 4.2 to the
Registrant's Form SB-2/A dated September 17, 1999).
4.3 7% Convertible Debenture Subscription Agreement dated as
of July 24, 1998 between the Registrant and the Investors
named therein (incorporated by reference to Exhibit 4.1 to
the Registrant's Form 8-K dated July 24, 1998).
4.4 Form of 7% Convertible Debenture (incorporated by
reference to Exhibit 4.2 to the Registrant's Form 8-K
dated July 24, 1998).
4.5 Registration Rights Agreement dated as of July 24, 1998
between the Registrant and the Investors named therein
(incorporated by reference to Exhibit 4.3 to the
Registrant's Form 8-K dated July 24, 1998).
4.6 Form of 10% Subordinated Note Subscription Agreement
(incorporated by reference to Exhibit 4.4 to the
Registrant's Form 8-K dated December 24, 1998.)
4.7 Form of 10% Subordinated Note (incorporated by reference
to Exhibit 4.5 to the Registrant's Form 8-K dated December
24, 1998).
4.8 Form of Registration Rights Agreement (incorporated by
reference to Exhibit 4.6 to the Registrant's Form 8-K
dated December 24, 1998).
<PAGE>
4.9 Form of Common Stock Subscription Agreement (incorporated
by reference to Exhibit 4.7 to the Registrant's Form 8-K
dated December 24, 1998).
4.10 Common Stock Purchase Agreement, dated May 7, 1999, by and
among the Registrant and the Purchasers listed therein
(incorporated by reference to Exhibit 4.1 to the
Registrant's Form 8-K dated May 7, 1999).
4.11 Registration Rights Agreement, dated May 7, 1999, by and
among the Registrant and the Purchasers listed therein
(incorporated by reference to Exhibit 4.2 to the
Registrant's 8-K dated May 7, 1999).
4.12 Form of Warrant (incorporated by Reference to Exhibit 4.3
to the Registrant's 8-K dated May 7, 1999).
4.13 Form of Subscription Agreement between the Company and the
subscribers listed therein for 12% Convertible
Subordinated Secured Notes Due July 2000 (incorporated by
reference to Exhibit 4.1 to the Registrant's 8-K dated
August 2, 1999).
4.14 Form of Security Agreement in connection with 12%
Convertible Subordinated Secured Notes Due 2000
(incorporated by reference to Exhibit 4.5 to the
Registrant's 8-K dated August 2, 1999).
4.15 Form of Registration Rights Agreement in connection with
12% Convertible Subordinated Secured Notes Due July 2000
(incorporated by reference to Exhibit 4.4 to the
Registrant's 8-K dated August 2, 1999).
4.16 Form of 12% Convertible Subordinated Secured Note Due July
2000 (incorporated by reference to Exhibit 4.2 to the
Registrant's 8-K dated August 2, 1999).
4.17 Form of Warrant issued in connection with 12% Convertible
Subordinated Secured Notes Due July 2000 (incorporated by
reference to Exhibit 4.3 to the Registrant's 8-K dated
August 2, 1999).
4.18 Warrant issued to Carl K. Doumani (incorporated by
reference to Exhibit 4.1 to the Registrant's 8-K dated
September 13, 1999).
4.19 Warrant issued to Roy Doumani (incorporated by reference
to Exhibit 4.2 to the Registrant's 8-K dated September 13,
1999).
4.20 Form of Warrant issued to finder (incorporated by
reference to Exhibit 4.3 to the Registrant's 8-K dated
September 13, 1999).
10.3 Employment Agreement of Daniel P. Ginns dated as of August
12, 1997 (incorporated by reference to Exhibit 10.3 to the
Registrant's Form SB-2/A dated September 17, 1999).
10.4 Security Agreement between the Registrant and Daniel P.
Ginns, dated as of August 12, 1997 (incorporated by
reference to Exhibit 10.4 to the Registrant's Form SB-2/A
dated September 17, 1999).
<PAGE>
10.5 Employment Agreement of Adrien A. Maught, Jr. dated as of
August 12, 1997 (incorporated by reference to Exhibit 10.5
to the Registrant's Form SB-2/A dated September 17,
1999).
10.6 Security Agreement between the Registrant and Adrien A.
Maught, Jr. dated as of August 12, 1997. (incorporated by
reference to Exhibit 10.6 to the Registrant's Form SB-2/A
dated September 17, 1999).
10.7 Loan Agreement with Branch Bank, dated as of August 20,
1999 (incorporated by reference to Exhibit 10.1 to the
Registrant's 8-K dated September 13, 1999).
10.8 Promissory Note payable to Branch Bank, dated as of August
20, 1999 (incorporated by reference to Exhibit 10.2 to the
Registrant's 8-K dated September 13, 1999).
10.9 Security Agreement and Addendum with Branch Bank, dated as
of August 20, 1999 (incorporated by reference to Exhibit
10.3 to the Registrant's 8-K dated September 13, 1999).
10.10 Form of Guarantee and Addendum of each of the guarantors
of the Registrant's line of credit with Branch Banking and
Trust Company (incorporated by reference to Exhibit 10.4
to the Registrant's 8-K dated September 13, 1999).
16.1 Letter of Ernst & Young LLP dated November 7, 1997,
regarding its comments to the statements made by
Registrant in Item 4 of Registrant's Form 8-K filed with
the Securities and Exchange Commission on November 7, 1997
(incorporated by reference to Exhibit 16.1 to the
Registrant's Form 8-K filed on November 7, 1997).
16.2 Letter of Deloitte & Touche LLP dated March 3, 1998
regarding its comments to the statements made by
Registrant in Item 4 of Registrant's Form 8-K filed with
the Securities and Exchange Commission on February 25,
1998 (incorporated by reference to Exhibit 16.1 to the
Registrant's Form 8-K/A filed on March 5, 1998).
16.3 Letter of Deloitte & Touche LLP dated May 8, 1998
regarding its comments to the statements made by
Registrant in Item 4 of Registrant's Form 8-K filed with
the Securities and Exchange Commission on April 30, 1998
(incorporated by reference to Exhibit 16.1 to the
Registrant's Form 8-K/A filed on May 21, 1998).
21.1 List of Subsidiaries.
27.1 Financial Data Schedule.
99.1 The Datametrics Employee Savings Plan And The Trust
Agreement Pursuant To The Datametrics Employee Savings
Plan (incorporated by reference to Exhibit 28 to
Registrant's Statement on Form S-8 filed on November 12,
1985 SEC File No. 33-01469.
99.2 The Amended and Restated 1993 Stock Option Plan of
Datametrics Corporation (incorporated by reference to
Exhibit 28.2 to Registrant's Form 10-K for the year ended
October 31, 1993).
<PAGE>
99.3 The 1986 Stock Option Plan of Datametrics Corporation, as
amended (incorporated by reference to Exhibit 28.1 to
Registrant's Registration Statement on Form S-8 filed on
June 10, 1987, SEC File No. 33-14969 and Exhibit 28.5 to
Registrant's Form 10-K for the year ended October 29,
1988).
99.4 The 1982 Stock Option Plan of Datametrics Corporation, as
amended (incorporated by reference to Exhibit 28.2 to
Registrant's Registration Statement on Form S-8 filed on
June 10, 1987, SEC File No. 33-14969).
99.5 The 1993 Directors' Option Plan of Datametrics Corporation
(incorporated by reference to Exhibit 28.5 to Registrant's
Form 10-K for the year ended October 31, 1993).
99.6 Datametrics Corporation Supplemental Executive Retirement
Plan and Master Trust Agreement (incorporated by reference
to Exhibit 28.6 to Registrant's From 10-K for the year
ended October 30, 1994).
99.7 The 1995 Stock Option Plan of Datametrics Corporation
(incorporated by reference to Exhibit 28.7 to Registrant's
Form S-8 Filed May 30, 1996, SEC File No. 333-04815).
99.8 The Datametrics Corporation Employee Qualified Stock
Purchase Plan (incorporated by reference to Exhibit 28.8
to Registrant's Form S-8 filed on May 30, 1996, SEC File
No. 333-04815).
EXHIBIT 21.1
Subsidiaries of Small Business Issuer
MadeMyWay.Com, Inc, was organized as a Delaware corporation on January 21,2000.
It is wholly-owned by the Small Business Issuer and does business under the name
"MadeMyWay.Com"(TM)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS OF DATAMETRICS CORPORATION AS OF
AND FOR THE YEAR ENDED OCTOBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> OCT-31-1999
<CASH> 137
<SECURITIES> 0
<RECEIVABLES> 2,441
<ALLOWANCES> 50
<INVENTORY> 3,403
<CURRENT-ASSETS> 6,892
<PP&E> 7,495
<DEPRECIATION> 5,519
<TOTAL-ASSETS> 12,627
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0
0
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<EPS-BASIC> (.38)
<EPS-DILUTED> (.38)
</TABLE>