UNITED
      STATES


SECURITIES
        AND EXCHANGE COMMISSION
 WASHINGTON,
        D.C. 20549
  FORM
        10-QSB
  (X)
            QUARTERLY
                REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE
                ACT OF
                1934  For
        the
        quarterly period ended July 31, 2007
  (
        )
        TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 
 Commission
        File No. 1-8690
  **DATAMETRICS
        CORPORATION**
 (Exact
        name of small business issuer as specified in its charter)
 **Delaware**
              **95-3545701**(State
                  or other jurisdiction of incorporation or organization)
              (I.R.S.
                  employer identification number)
  **1717
        Diplomacy Row, Orlando, FL 32809**
 (Address
        of principal executive offices)
  **407.251.4577**
 (Issuer's
        telephone number)
  Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 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 o
  Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).  YES o  NO x
  Number
        of
        shares outstanding of the issuer's common stock, par value $.01, outstanding
        as
        of September 19, 2007: 11,534,736 shares.
  Transitional
        Small Business Disclosure Format (Check one): YES o  NO x


1
          of 17




DataMetrics
      Corporation





Table
      of
      Contents




PagePart
                  I. Financial InformationItem
                  1 - Condensed Consolidated Financial Statements
                  (Unaudited)Condensed
                  Consolidated Balance Sheet - July 31, 2007
              3Condensed
                  Consolidated Statements of Operations --
              4Nine
                  months ended July 31, 2007 and 2006Three
                  months ended July 31, 2007 and 2006Condensed
                  Consolidated Statement of Capital Deficit --
              5Nine
                  months ended July 31, 2007Condensed
                  Consolidated Statements of Cash Flows --
              6Nine
                    months ended July 31, 2007 and 2006Notes
                  to Condensed Consolidated Financial Statements (Unaudited)
              7Item
                  2 - Management Discussion and Analysis
              9Item
                  3 - Controls and Procedures
              12Part
                  II - Other InformationItem
                  1 -- Legal Proceedings
              13Item
                  2 -- Unregistered Sales of Equity Securities and Use of Proceeds
              13Item
                  3 -- Defaults upon Senior Securities
              13Item
                  4 -- Submission of Matters to a Vote of Security Holders
              13Item
                  5 -- Other Information
              13Item
                  6 -- Exhibits
              13Signatures
              14Certifications
              15




2
          of 17




**CONDENSED
        CONSOLIDATED BALANCE SHEET**
 **JULY
        31, 2007**
 **(Unaudited)**
 **(in
        thousands, except per share data)**


**ASSETS****Current
                  assets**Cash
              
              $
              158Accounts
                  receivable, net of allowance for doubtful accounts of $1
              
              
              294Inventory,
                  net of allowance for obsolete inventory of $5,797
              
              
              850Other
                  current assets
              
              
              12Total
                  current assets
              
              
              1,314**Property
                  and equipment**Furniture,
                  fixtures and computer equipment
              
              
              1,197Machinery
                  and equipment
              
              
              555Total
                  property and equipment
              
              
              1,752Less
                  accumulated depreciation
              
              
              1,752Net
                  property and equipment
              
              
              0Total
                  Assets
              
              $
              1,314**LIABILITIES
                  AND CAPITAL DEFICIT****Current
                  liabilities**Accounts
                  payable
              
              $
              384Accrued
                  expenses
              
              
              433Accrued
                  interest
              
              
              183Warranty
                  reserve
              
              
              40Notes
                  payable - related parties
              
              
              500Short
                  term debt
              
              
              141Total
                  current liabilities
              
              
              1,681**Commitments
                  and contingencies****Capital
                  deficit**4%
                  Cumulative preferred stock, $.01 par value ($1,500 aggregate
                  liquidationpreference);
                  40,000 authorized; 1,000 issued and outstanding
              
              
              10Common
                  stock, $.01 par value; 800,000 sharesauthorized;
                  11,535 issued and outstanding
              
              
              116Additional
                  paid in capital
              
              
              64,683Accumulated
                  deficit
              
              
              (65,176
              )Total
                  capital deficit
              
              
              (367
              )Total
                  Liabilities and Capital Deficit
              
              $
              1,314




The
      accompanying notes to condensed unaudited consolidated
      financial statements are an integral part of these statements.




3
          of 17


**CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS**
 **FOR
        THE NINE MONTHS AND THREE MONTHS ENDED JULY 31, 2007 AND
        2006**
 **(Unaudited)**
 **(in
        thousands, except per share data)**





Three
                Months Ended
            Nine
                monthsEndedJuly
                31
            July
                312007
            
            
            2006
            
            
            2007
            
            
            2006**Sales**
            
            $
            643
            
            $
            329
            
            $
            2,566
            
            $
            2,537**Cost
                of sales**
            
            
            482
            
            
            529
            
            
            1,762
            
            
            2,073**Gross
                profit**
            
            
            161
            
            
            (200)
            
            
            804
            
            
            464**Selling,
                general and administrative****Personnel
                and related costs**
            
            
            196
            
            
            172
            
            
            679
            
            
            563**Other**
            
            
            171
            
            
            199
            
            
            602
            
            
            667**Total
                selling, general and administrative**
            
            
            367
            
            
            371
            
            
            1,281
            
            
            1,230**Loss
                from operations**
            
            
            (206
            )
            
            (571
            )
            
            (477
            )
            
            (766
            )**Other
                income (expense)**
            
            
            (18
            )
            
            6
            
            
            (24
            )
            
            (1,940
            )**Net
                loss**
            
            $
            (224
            )
            $
            (565
            )
            $
            (501
            )
            $
            (2,706
            )**Loss
                per share of common stock****Basic
                and diluted**
            
            $
            (0.02
            )
            $
            (0.05
            )
            $
            (0.04
            )
            $
            (0.31
            )**Weighted
                average number of common shares outstanding****Basic
                and diluted**
            
            
            11,535
            
            
            11,115
            
            
            11,507
            
            
            8,794




The
      accompanying notes to condensed unaudited consolidated
      financial statements are an integral part of these statements.




4
          of 17


**CONDENSED
        CONSOLIDATED STATEMENT OF CAPITAL DEFICIT**
 **FOR
        THE NINE MONTHS ENDED JULY 31, 2007**
 **(Unaudited)**
 **(in
        thousands)**





**Common
                Stock**
            **Ser.
                B Preferred**
            
            **Additional**
            
            
            
            
            
            **Total****Number**
            
            
            **Dollar**
            
            
            **Number**
            
            
            **Dollar**
            
            
            **Paid-In**
            
            
            **Accumulated**
            
            
            **Capital****of
                Shares**
            
            
            **Amount**
            
            
            **of
                Shares**
            
            
            **Amount**
            
            
            **Capital**
            
            
            **Deficit**
            
            
            **Deficit****Balance,
                Oct. 31, 2006**
            
            
            11,360
            
            $
            114
            
            
            700
            
            $
            7
            
            $
            64,367
            
            $
            (64,654
            )
            $
            (166
            )**Issuance
                of series B preferred stock**
            
            
            
            
            
            
            
            
            300
            
            
            3
            
            
            297
            
            
            
            
            
            300**Issuance
                of common stock for series B preferred stock
                dividend**
            
            
            175
            
            
            2
            
            
            
            
            
            
            
            
            19
            
            
            (21
            )
            
            -**Net
                loss**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (501
            )
            
            (501
            )**Balance,****July
                31, 2007**
            
            
            11,535
            
            $
            116
            
            
            1,000
            
            $
            10
            
            $
            64,683
            
            $
            (65,176
            )
            $
            (367
            )




The
      accompanying notes to condensed unaudited consolidated financial statements are an integral part of these
      statements




5
          of 17




**CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **FOR
        THE NINE MONTHS ENDED JULY 31, 2007 AND 2006**
 **(Unaudited)**
 **(in
        thousands)**


2007
              
              2006**Cash
                  flows from operating activities**Net
                  loss
              
              $
              (501
              )
              $
              (2,706
              )Adjustments
                  to reconcile net loss used in operating activities:Gain
                  on sale of building
              
              
              -
              
              
              (216
              )Depreciation
              
              
              7
              
              
              4Expenses
                  paid from debt financing
              
              
              -
              
              
              249Options
                  issued to investors during restructuring
              
              
              -
              
              
              2,186Issuance
                  of common stock in lieu of payment for director fee
              
              
              -
              
              
              50Changes
                  in current assets and liabilitiesAccounts
                  receivable-net
              
              
              (214
              )
              
              41Inventory-net
              
              
              (145
              )
              
              259Other
                  current assets
              
              
              31
              
              
              46Accounts
                  payable
              
              
              101
              
              
              (321
              )Accrued
                  expenses
              
              
              260
              
              
              (134
              )Net
                  cash used in operating activities
              
              
              (461
              )
              
              (542
              )**Cash
                  flows from investing activities**Proceeds
                  from sale of building
              
              
              -
              
              
              1,445Net
                  cash provided by investing activities
              
              
              -
              
              
              1,445**Cash
                  flows from financing activities**Proceeds
                  from loan payable
              
              
              -
              
              
              248Proceeds
                  from issuance of series B preferred stock
              
              
              300
              
              
              -Payments
                  on long term debt
              
              
              -
              
              
              (1,180
              )Net
                  cash provided by (used in) financing activities
              
              
              300
              
              
              (932
              )**Net
                  (decrease) increase in cash**
              
              
              (161
              )
              
              (29
              )**Cash**,
                  beginning of period
              
              
              319
              
              
              146**Cash**,
                  end of period
              
              $
              158
              
              $
              117**Supplemental
                  disclosure of cash flow information:**Cash
                  paid for interest
              
              
              -
              
              $
              72Issuance
                  of common stock options for restructuring incentive
                  expenses
              
              
              -
              
              $
              2,186Issuance
                  of common stock in extinguishment of long-term debt and related
                  interest
                  expense
              
              
              -
              
              $
              3,081Issuance
                  of series B preferred stock in extinguishment of long-term debt
                  and
                  related interest expense
              
              
              -
              
              $
              500Conversion
                  of series A preferred stock into common stock
              
              
              -
              
              $
              489Expenses
                  paid with the issuance of notes payable
              
              
              -
              
              $
              249Issuance
                  of note payment for extinguishment of short term bridge loan
              
              
              -
              
              $
              200Forgiveness
                  of debt as part of the sale of building
              
              
              -
              
              $
              30Issuance
                  of common stock in lieu of payment of directors fee
              
              
              -
              
              $
              50Issuance
                  of common stock for series B preferred stock dividend
              
              $
              21
              
              
              -




The
      accompanying notes to condensed unaudited  consolidated
      financial statements are an integral part of these statements




6
          of 17




Notes
      to condensed consolidated financial
      statements (unaudited)


**1.
        Organization and Summary of Significant Accounting
        Policies:**
  **(a)
        Basis of Presentation—** The
        accompanying condensed consolidated financial statements are unaudited and
        have
        been prepared by the Company in accordance with the rules and regulations
        of the
        Securities and Exchange Commission (SEC). Accordingly, certain information
        and
        footnote disclosures usually found in financial statements prepared in
        accordance with accounting principles generally accepted in the United States
        of
        America have been condensed or omitted. The financial statements should be
        read
        in conjunction with the consolidated financial statements and related notes
        included in the Company's Form 10-KSB, as filed with the SEC on February
        13,
        2007.
  The
        accompanying condensed consolidated financial statements reflect all adjustments
        (consisting of normal recurring adjustments) which, in the opinion of
        management, are necessary to present fairly the financial position and the
        results of operations for the interim periods presented. The results of
        operations for an interim period are not necessarily indicative of the results
        of operations for a full fiscal year.
  **(b)
        Use of Estimates—** The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America, requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities, the disclosed amounts of contingent assets and liabilities at
        the
        date of the financial statements, and the amounts of revenues and expenses
        recognized during the reporting period. Actual results could differ from
        those
        estimates.
  **(c)
        Research and Development Expenses—** The
        Company expenses research and development costs as incurred. Research and
        development expense was $79,160 and $5,169 for the nine month period ended
        July
        31, 2007 and 2006 respectively.
  **2.
        New Accounting Pronouncements**
 
 In
        June
        2006, Financial Accounting Standards Board (“FASB”) issued FASB Interpretation
        (“FIN”) No. 48 *“Accounting
        for Uncertainty in Income Taxes”.* This
        interpretation clarifies the accounting for uncertainty in income taxes
        recognized in an enterprise’s financial statements in accordance with Statement
        of Financial Accounting Standard (“SFAS”) 109. This interpretation prescribes a
        recognition threshold and measurement attribute for the financial statement
        recognition and measurement of a tax position taken or expected to be taken
        in a
        tax return. FIN No. 48 also provides guidance on recognition, classification,
        interest and penalties, accounting in interim periods, disclosure and
        transition. FIN No. 48 is effective for fiscal years beginning after December
        15, 2006. Management has not yet determined the impact this pronouncement
        will
        have on the Company’s financial statements.
  In
        September 2006, the FASB issued SFAS 157, “Fair Value Measurements.” This
        standard defines fair value, establishes a framework for measuring fair value
        in
        accounting principles generally accepted in the United States (“GAAP”), and
        expands disclosures about fair value measurements. This standard is effective
        for financial statements issued for fiscal years beginning after November
        15,
        2007. DataMetrics is currently evaluating the requirements of SFAS 157 and
        has
        not yet determined the impact on the Company’s financial condition, results of
        operations or cash flows.
 
 In
        February 2007, the FASB issued SFAS 159, “Fair Value Option for Financial Assets
        and Financial Liabilities - Including an amendment of FASB Statement No.
        115”.
        SFAS 159 permits entities to choose to measure many financial instruments
        and
        certain other items at fair value. The statement is effective for fiscal
        years
        beginning after November 15, 2007. DataMetrics is currently evaluating the
        requirements of SFAS 159 and has not yet determined the impact on the Company’s
        financial condition, results of operations or cash flows.
 
 **3.
        Inventories**
 
 Stockroom
        inventories consist primarily of materials used by the Company for existing
        and
        anticipated contracts and materials and finished assemblies which are held
        to
        satisfy spare parts requirements of the Company’s customers. Those parts not
        expected to be sold within one year are classified as a non-current asset
        and
        fully reserved. The Company evaluates all inventories for obsolescence on
        a
        periodic basis and records estimated reserves accordingly.




**Inventories
                as of****July
                31, 2007****consist of the following**:
            
            (in
                thousands)Inventories
                Parts and sub-assemblies
            
            $
            680Work
                in Process
            
            
            170Obsolete
                Inventory
            
            
            5,797Total
                Inventory
            
            
            6,647Reserve
                for Obsolete Inventory
            
            
            5,797Net
                Inventory
            
            $
            850




7
          of 17


**4.
        Short term debt**
  Short
                  term debt at July 31, 2007 consist of the following:In
                  December 1998, the Company closed a private placement of approximately
                  $3.45 million of 10% Subordinated Notes originally due in December
                  2000.
                  As of July 31, 2007 all but $141 of this debt has been converted.
                  Negotiations for the settlement of the remainder of this debt are
                  ongoing.
                  The debt is unsecured and callable under certain
                  conditions.
              
              
              $141
 
 **5.
        Notes payable-related parties**
  Notes
                  Payable at July 31, 2007 consist of the following:Notes
                  Payable to investors; interest expense at 10% is to be paid monthly
                  commencing January 31, 2007, including accrued and unpaid interest
                  from
                  2006; principal and unpaid interest is due in full in December
                  2007. The
                  note is secured by a first priority lien on all Company
                  assets.
              
              
              $500
 
 **6.
        Common stock**
 
 On
        December 15, 2006 the Company issued 174,887 shares of Common Stock with
        a par
        value of $0.01 in the amount of $20,986 ($0.12 per share) to a related party,
        SG
        DMTI Capital, LLC in lieu of the 4% annual cumulative dividend on the Series
        B
        Preferred Stock that was due on November 30, 2006.
 
 **7.
        Preferred stock**
 
 On
        December 6, 2006 the Company issued 300,000 shares of Series ‘B’ Preferred Stock
        with a par value of $0.01 to a related party, SG DMTI Capital, LLC. At January
        31, 2007 the Company has 1,000,000 shares of Series ‘B’ Preferred Stock with a
        par value of $0.01 per share outstanding. The stock has a cumulative dividend
        of
        4% per annum.
  **8.
        Loss per share of common stock**
  Basic
        and
        diluted loss per share of common stock are computed using the weighted-average
        number of shares of common stock outstanding during the period. Potentially
        dilutive securities have been excluded from the computation of diluted earnings
        per share, as their effect is antidilutive. If the Company had reported net
        income, diluted earnings per share would have included the shares used in
        the
        computation of net loss per share plus common equivalent shares related to
        12,935,000 for outstanding options and warrants for the fiscal years 2007
        and
        2006.
 
 **9.
        Subsequent events**
 
 On
        August
        31, 2007, Mr. Edward Kroning resigned his position as Chief Financial Officer
        of
        the Company. Mr. Kroning retains his position as Corporate Secretary of the
        Company. Ms. Tami Tharp was elected by the Board of Directors to serve as
        the
        interim Chief Financial Officer until her successor is appointed.
 
 On
        September 4, 2007, the Company signed an agreement to increase the principal
        balance of the Secured Promissory Note from $500,000 to $570,000, a net increase
        of $70,000. The additional $70,000 did not alter any of the rights and
        obligations with respect to the Secured Promissory Note other than increasing
        the principal amount of the loan. The entire principal and any unpaid accrued
        and unpaid interest (which accrues at a rate of 10% per annum) is due in
        full in
        December 2007.




8
          of 17


**Item
        2. Management’s Discussion and Analysis of Financial Condition and Results of
        Operations.**
 
 The
        following discussion of the financial condition and results of operations
        should
        be read in conjunction with the consolidated financial statements and related
        notes thereto. The following discussion contains certain forward-looking
        statements that involve risk and uncertainties. Our actual results could
        differ
        materially from those discussed herein. Factors that could cause or contribute
        to such differences include, but are not limited to, risks and uncertainties
        related to the need for additional funds. We undertake no obligation to publicly
        release the results of any revisions to those forward-looking statements
        that
        may be made to reflect any future events or circumstances.
  **Business
        Overview**
 
 The
        Company designs, develops, and manufactures computers and computer peripheral
        equipment for military, industrial and commercial applications where reliable
        operation of the equipment in challenging environments is imperative. The
        systems and equipment are qualified for use in airborne, shipboard, and ground
        based applications. The Company’s product lines include a broad range of
        computers, computer workstations, servers, printers, plotters and monitors.
 
 The
        Company offers military specified and ruggedized versions of flat panel monitors
        and other peripheral equipment (including computers, printers, keyboards
        and
        trackballs) encased in shock, vibration and temperature resistant chassis.
        The
        chassis produced by the Company are used in conjunction with its product
        by the
        military to house this sensitive ruggedized equipment. The Navy P3 Orion,
        Air
        Force AWACS and Army Fire-Finder programs all require rugged rack enclosures
        to
        protect the equipment from shock, vibration and other damage which may be
        experienced in a harsh operating environment. DataMetrics continues to focus
        upon increasing its presence in the military arena including United States
        Air
        Force avionics and ground-based systems as well as United States Army system
        diagnostics as well as increasing its presence in the mining sector and aviation
        industry, primarily with its electronic flight bag (EFB) controller.
        DataMetrics’ equipment is designed and qualified for use as part of commercial
        airlines cockpit systems.
 
 For
        the
        year ended July 31, 2007, the Company has experienced slower than expected
        receipt of orders. Many of the military programs from which the Company
        anticipates generating its revenue have been rescheduled and military priorities
        have been reconsidered to account for short, medium, and long-term needs.
        The
        Company expects to see an increase in order activity in the remaining quarter
        and attributes the delay in orders due to a focus on budget spending for
        troops
        and munitions in the war effort in Afghanistan and Iraq. The following phases
        in
        this war and projected increase in overall military and defense spending
        may
        entail more sophisticated surveillance techniques and equipment, which will
        require data processing and peripheral equipment similar to the products
        we
        currently supply for the AWACS, P3 Orions aircraft and the armed forces.
 
 **RESULTS
        of OPERATIONS**
 
 **For
        the Nine months Ended July 31, 2007**
 
 Sales.
        We
        had sales of $2,566,000 in the nine months ended July 31, 2007 compared to
        $2,537,000 in the comparable period in 2006, an increase of $29,000 or 1.14%.
        The increase in sales for the nine months ended July 31, 2007 is attributable
        mainly to an increase in the receipt of orders from the U.S. Government and
        major Defense Contractors.
 
 Cost
        of
        sales. We had cost of sales of $1,762,000 in the nine months ended July 31,
        2007, representing approximately 68.67% of sales, compared to cost of sales
        of
        $2,073,000 in the comparable period in 2006, which represented 81.71% of
        sales.
        The decrease of $311,000 or 15.00% was primarily due to a reduction in
        manufacturing overhead and fixed costs that were recorded in the comparable
        period in 2006.
 
 Gross
        profit. We had gross profit of $804,000 in the nine months ended July 31,
        2007
        representing approximately 31.33% of sales, compared to a gross profit of
        $464,000 in the comparable period in 2006, which represented 18.29% of sales.
        The increase of $340,000 was primarily attributable to the decrease in cost
        of
        sales as previously discussed.
 
 Selling,
        general and administrative expenses. We had selling, general and administrative,
        “SG&A”, expenses for the nine months ended July 31, 2007 of $1,281,000
        approximately 49.92% of sales, compared to $1,230,000 in the comparable period
        in 2006, which represented 48.48% of sales. This represents an increase of
        $51,000 or 4.15% in SG&A and is attributable mainly to increased personnel
        and related costs associated with an increase in headcount for the fiscal
        year.




9
          of 17


Loss
        from
        operations. We had loss from operations for the nine months ended July 31,
        2007
        of $(477,000) compared to loss from operations of $(766,000) in the comparable
        period in 2006, a decrease of $289,000 or 37.73%. The net decrease in loss
        from
        operations is attributable mainly to a reduced cost of sales of 15.00 % and
        an
        increase in SG&A as previously discussed.
 
 Other
        expense. We had other expense of $24,000 for the nine months period ended
        July
        31, 2007 compared to $1,940,000 in the comparable period in 2006, a decrease
        of
        $1,916,000 or 98.76%. The decrease was due primarily to warrants totaling
        386,315,000 which were issued during 2006. The exercise price for the warrants
        was less than the market price of the stock resulting in stock based cost
        being
        recorded. The decrease is also due to a reduction in interest expense as
        a
        result of the debt restructuring that occurred on December 30, 2005 where
        the
        majority of long terms loans were either paid in full or converted into equity
        of the Company.
  Net
        loss.
        We had net loss for the nine months ended July 31, 2007 of $(501,000) compared
        to a net loss of $(2,706,000) in the comparable period in 2006. The large
        net
        loss in 2006 was due primarily to warrants totaling 386,315,000 which were
        issued during 2006. The exercise price for the warrants was less than the
        market
        price of the stock resulting in stock based cost in the amount of $2,186,000
        being recorded.
  **For
        the Three Months Ended July 31, 2007**
 
 Sales.
        We
        had sales of $643,000 for the three months ended July 31, 2007 compared to
        $329,000 in the comparable period in 2006, an increase of $314,000 or 95.44%.
        The increase in sales for the three months ended July 31, 2007 is attributable
        mainly to an increase in the receipt of orders from the U.S. Government and
        major Defense Contractors.
 
 Cost
        of
        sales. We had cost of sales of $482,000 the three months ended July 31, 2007,
        representing approximately 74.96% of sales, compared to cost of sales of
        $529,000 in the comparable period in 2006, which represented 160.79% of sales.
        The decrease of $47,000 or 8.88% was primarily due to a reduction in
        manufacturing overhead and fixed costs that were recorded in the comparable
        period in 2006.
 
 Gross
        profit. We had gross profit of $161,000 in the three months ended July 31,
        2007
        representing approximately 25.04% of sales, compared to a gross profit of
        $(200,000) in the comparable period in 2006, which represented (60.79)% of
        sales. The increase of $361,000 or 180.50% was primarily due to the increase
        in
        sales as previously discussed.
 
 Selling,
        general and administrative expenses. We had selling, general and administrative,
        “SG&A”, expenses for the three months ended July 31, 2007 of $367,000,
        approximately 57.08% of sales, compared to $371,000 in the comparable period
        in
        2006, which represented 112.77% of sales. SG&A expenses, stated as a
        percentage of sales, decreased substantially between years due to increased
        sales for 2007 as compared to the same period in 2006.
 
 Loss
        from
        operations. We had loss from operation for the three months ended July 31,
        2007
        of $(206,000) compared to loss from operations of $(571,000) in the comparable
        period in 2006, a decrease of $365,000 or 63.92%. The decrease in loss from
        operations is attributable mainly to an increased sales volume of 95.44%.
 
 Other
        (expense)/income. We had other expense of $(18,000) for the three months
        period
        ended July 31, 2007 compared to other income of $6,000 in the comparable
        period
        in 2006, a decrease in other income of $24,000 or 400.00%. The increase in
        other
        expense is primarily attributable to directors compensation that was not
        recorded in the comparable period in 2006.
 
 Net
        loss.
        We had net loss for the three months ended July 31, 2007 of $(224,000) compared
        to a net loss of $(565,000) in the comparable period in 2006. The decrease
        in
        net loss is due to an increase in sales as discussed previously.
 
 **LIQUIDITY
        and CAPITAL RESOURCES**
 
 The
        Company's principal capital requirements have been to fund working capital.
        The
        Company has relied primarily on internally generated funds, private placement
        proceeds, and subordinated debt to finance its operations. The Company has
        no
        material commitments for capital expenditures which would affect its
        liquidity.
 
 Net
        cash
        used in operating activities was $461,000 and $542,000 in 2007 and 2006
        respectively. The change from 2006 to 2007 was primarily due to an increase
        in
        inventory levels to fulfill upcoming sales orders and as a result of the
        net
        loss.
 
 Net
        cash
        provided by investing activities in 2006 was $1,445,000 derived from the
        sale of
        the building. There were no investing activities in 2007.




10
          of 17


Net
        cash
        provided / (used) by financing activities was $300,000 and $(932,000) in
        2007
        and 2006, respectively. The change from 2006 to 2007 was primarily related
        to
        the refinancing of the property located at 1717 Diplomacy Row, Orlando, FL.,
        and
        the issuance of Preferred stock as described below.
  The
        Company has generated much of the cash flow to sustain current operations
        through a combination of sales and from debt and equity
        transactions.
 
 On
        December 6, 2006, the Company issued SGD 300,000 shares of Series B Preferred
        Stock for $300,000. As a result, an aggregate of 1,000,000 shares of shares
        of
        Series B Preferred Stock, the total amount of shares issuable under the Series
        B
        Preferred Stock and Warrant Purchase Agreement dated December 30, 2005, have
        been issued to SGD. The proceeds of the sale of the 300,000 shares were used
        for
        general working capital.
 
 On
        December 15, 2006 the Company issued 174,887 shares of Common Stock with
        a par
        value of $0.01 in the amount of $20,986 to a related party, SG DMTI Capital,
        LLC
        in lieu of the 4% annual cumulative dividend on the Series B Preferred Stock
        that was due on November 30, 2006.
  On
        September 4, 2007, the Company signed an agreement to increase the principal
        balance of the Secured Promissory Note from $500,000 to $570,000, a net increase
        of $70,000. The additional $70,000 did not alter any of the rights and
        obligations with respect to the Secured Promissory Note other than increasing
        the principal amount of the loan. The entire principal and any accrued and
        unpaid interest (which accrues at a rate of 10% per annum) is due in full
        in
        December 2007. The proceeds were used for general working capital.
 
 The
        liquidity of the Company has been affected by net losses for the second and
        third quarters of 2007, and fiscal years 2006 and 2005, which raise doubt
        about
        the Company’s ability to continue as a going concern. The Company’s realization
        of assets and satisfactions of liabilities in the ordinary course of business
        are dependent upon several factors including the Company’s ability to secure
        additional funding through investment groups and the generation of sufficient
        cash flow to satisfy its obligations on a timely basis.
 
 The
        Company as part of its plan towards resolving these issues has taken the
        actions
        described below. Management believes that its current and future plans provide
        an opportunity to continue as a going concern. The accompanying consolidated
        financial statements do not include any adjustments relating to the
        recoverability and classification of recorded assets, or the amounts and
        classification of liabilities that may be necessary in the event the Company
        cannot continue as a going concern.
  ·
            During
                fiscal year 2007, the operations and processes of the Company are
                being
                analyzed and restructured to obtain greater efficiencies in production
                and
                distribution. Management continues to evaluate operations as well
                and has
                made several changes in management and personnel that are designed
                to
                improve product distribution, project completion and on-time delivery.
                Management believes that these efficiencies have positioned the Company
                to
                experience increased sales volume. ·
            Effective
                May 24, 2007, Mr Daniel Bertram resigned his postion as a member
                of the
                Board of Directors, Chief Executive Officer and President of the
                Company.
                Mr. John Marceca was elected to serve as President and Chief Operating
                Officer. ·
            On
                June 1, 2007 the Company successfully completed a reduction in force
                reducing annual payroll expense approximately $167,000 and reducing
                the
                employee headcount from 31 to 27
                employees.  **Off-Balance
        Sheet Arrangements**
  We
        have
        no off-balance arrangements to report.


11
          of 17


**Item
        3.**  **CONTROLS
        AND PROCEDURES**
 
 **(A)
        Evaluation of Disclosure Controls and Procedures**
 
 As
        of the
        end of the period covered by this report, the Company carried out an evaluation,
        under the supervision and with the participation of the Company’s Principal
        Operating Officer and Principal Financial Officer of the effectiveness of
        the
        design and operation of the Company’s disclosure control and procedures. The
        Company’s disclosure controls and procedures are designed to provide a
        reasonable level of assurance of achieving the Company’s disclosure objectives.
        The Company’s Principal Operating Officer and Principal Financial Officer have
        concluded that the Company’s disclosure controls and procedures are in fact,
        effective at this reasonable assurance level as of the period covered. In
        addition, the Company reviewed its internal controls, and there have been
        no
        significant changes in its internal controls or in other factors that could
        significantly affect those controls subsequent to the date of their last
        evaluation or from the end of the reporting period to the date of this Form
        10-QSB.
 
 **(B)
        Changes In Internal Controls Over Financial Reporting**
 
 In
        connection with the evaluation of the Company’s internal controls during the
        nine months ended July 31, 2007 the Company’s Principal Operating Officer and
        Principal Financial Officer have determined that there are no changes to
        the
        Company’s internal controls over financial reporting that has materially
        affected, or is reasonable likely to materially affect, the Company’s internal
        controls over financial reporting.




12
          of 17


**PART
        II. Other Information**
 
 **Item
        1. LEGAL PROCEEDINGS**
 
 The
        Company is, from time to time, the subject of litigation, claims and assessments
        arising out of matters occurring during the normal operation of the Company's
        business. In the opinion of management, the liability, if any, under such
        current litigation, claims and assessments, that are material, have been
        properly accrued.
 
 **Item
        2.**  **UNREGISTERED
        SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**
 
 None
 
 **Item
        3. DEFAULTS UPON SENIOR SECURITIES**
 
 The
        Company is in default on certain unsecured indebtedness of $140,960 in principal
        and $103,371 in unpaid interest as the monthly payments of $10,000 that were
        to
        commence September, 2006 for the unpaid interest have not been paid as scheduled
        per the agreement.
 
 The
        Company is in default on certain secured indebtedness of $500,000 in principal
        and $79,280 in unpaid interest as the monthly payments of $5,000 that were
        to
        commence January, 2007 for the unpaid interest have not been paid as scheduled
        by the agreement.
  **Item
        4.**  **SUBMISSION
        OF MATTERS TO A VOTE OF SECURITY HOLDERS**
 
 None
 
 **Item
        5. OTHER INFORMATION**
 
 None
 
 **Item
        6. EXHIBITS AND OTHER INFORMATION**
 
 Signatures
 
 Certifications




13
          of 17


**SIGNATURES**





In
      accordance with Section 13 or 15 (d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




Dated: September 19,
              2007**DataMetrics
              Corporation**RegistrantBy
*/s/
              John Marceca*John
              MarcecaPresident & Chief Operating
              OfficerBy */s/
              Tami Tharp*Tami
              TharpActing Chief Financial
              Officer




14
          of 17