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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
--------------------------------------------------------------------------------
                    (Exact name of Small Business Registrant)


          Delaware                                                95-3545701
          --------                                                ----------
(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
                                                           --------------

           Securities registered pursuant to Section 12(b) of the Act:

   Title of each class                 Name of each exchange on which registered
   -------------------                 -----------------------------------------
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.

                                        3
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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.

                                       4
<PAGE>

     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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<PAGE>

     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
-------------------------                              ----          ---

            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


                                       8
<PAGE>

Fiscal 1998 Quarter Ended.......................       High          Low
-------------------------                              ----          ---

            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.

                                       9
<PAGE>

     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).