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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 28, 2001

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.)

                   1717 Diplomacy Row, Orlando, Florida 32809
                -------------------------------------------------
                    (Address of principal executive offices)

Registrant's telephone number, including area code:  (407) 251-4577
                                                     --------------

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         Nasdaq Over the Counter Bulletin Board

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 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

<PAGE>

incorporated by reference in Part IV of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]

State Issuer's revenues for its most recent fiscal year:   $4,667,000
                                                          -------------

State the number of shares outstanding of the Registrant's Common Stock ("Common
Stock"), as of the latest practicable date: 39,827,227 shares of Common Stock as
of March 7, 2002.

The aggregate market value of the common equity of the Company held by
non-affiliates as of March 7, 2002 was $1,944,210.

PART I

ITEM 1.  BUSINESS.

      General

      This report contains certain statements of a forward-looking nature
relating to future events or the future performance of DataMetrics Corporation
("DataMetrics" or 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,
without limitation, that Department of Defense ("DoD") contracts are subject to
termination without cause, competitive factors and pricing pressures.

      The Company, which commenced operations in 1962, is a manufacturer of
ruggedized information technology equipment, including computers, printers,
workstations and peripherals, which are designed to work in harsh environments.
The Company's information technology equipment is principally used in military
applications and commercial aircraft. During the fiscal year ended October 28,
2001, the Company consolidated its operations to return our business to its core
competencies - the design and manufacture or rugged components and systems to
the military/defense and avionics industries. Sales increased from $2.8M in the
fiscal year ended October 31, 2000 to $4.7M in the 2001 fiscal year. This growth
was attributed primarily to a re-focus on our military/defense business. In
addition, in March 2001, Daniel Bertram was hired to lead the sales and
marketing efforts of the Company. In June 2001, he became President and Chief
Executive Officer.

The effort to reorganize the Company's operations included:

     o    Implementation of a "10 step recovery plan" that reduced material,
          facility, and personnel costs, while focusing the organization on
          sales performance.

     o    Closing offices in New Jersey and Pennsylvania and consolidating all
          corporate functions into the Company's headquarters in Orlando,
          Florida.

     o    Discontinuance of the Company's MadeMyWay division, including all
          involvement with OurYearBook, Inc.

In an attempt to increase productivity and employee satisfaction, the corporate
organization was completely restructured to create a team-based environment that
eliminates traditional hierarchy and emphasized individual initiative. A
corporate vision statement was also articulated that stresses teamwork,
learning, continuous improvement and creating customer success.

In December 2001, DataMetrics acquired Peripheral Equipment Corporation ("PEC"),
a supplier of equipment similar to DataMetrics' product line and to the same
market. This has been a productive acquisition. Employees of PEC provide strong
talent and experience in areas important to DataMetrics, particularly marketing
and engineering. The transition has been completed without significant
additional cost or inconvenience to customers.

DataMetrics is now better able to broaden its exposure to customers. DataMetrics
had previously marketed itself as a ruggedized printer manufacturer. The Company
is capable of producing and supplying other products to customers. DataMetrics
is now more proficient in various ruggedized and durable peripheral data
processing and printing equipment.

Further, the Company was organized into three business units. A new corporate
identity was also adopted that included a new logo and an official spelling of
DataMetrics (one word with a capital "M"). The business units are:

1.   DataMetrics(TM) - Includes all products and services designed and
     manufactured for Military/defense applications.

2.   Vizzix(TM) Systems - The new name for the business unit that encompasses
     all the commercial printing products and services including industrial
     grade thermal transfer printers which are not ruggedized. The principal
     models include the Condor(TM), Harrier(TM) and IPS3300(TM).

3.   DataMetrics Commercial Airline Products - Includes all products
     manufactured for commercial and corporate jets.

DataMetrics(TM)
---------------

The Company has re-focused its efforts on re-cultivating and re-establishing
ties with procurement agencies of the Department of Defense and its prime
contractors.

The Company has designed, developed, manufactured and sold military
specification ("mil-spec") and ruggedized information technology equipment,
including computers, workstations, printers, chassis and peripheral equipment
for use in DoD applications. The Company also participates in the DoD's COTS
(Commercial Off The Shelf) procurement which are built to military
specifications but contain commercially available components. For the 2001
Fiscal Year, approximately 90% of the Company's revenues were derived from the
DoD and defense contractors, of which approximately 47% was derived from
contracts directly with the DoD.

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 manufactures a wide range of printers, which are categorized
as either mil-spec or ruggedized. These printers utilize thermal, impact,
ink-jet 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.

      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 encased
in shock, vibration and temperature resistant housing for products of equipment
manufacturers such as Digital Equipment Corporation, 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.

      Monitors, Chassis and Peripheral Equipment

      The Company offers mil-spec and ruggedized versions of flat panel monitors
and other peripheral equipment (including keyboards and trackballs) encased in
shock, vibration and temperature resistant housing. The chassis produced by the
Company are used in conjunction with equipment. Military programs use chassis to
house sensitive equipment. The Navy P3 Orion, Air Force AWACS and Army
Firefinder programs all require rugged rack enclosures to protect the equipment
from shock and vibration damage in a harsh operating environment.

      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. 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 Fiscal 2001, the Company's largest customers were the U.S. government,
Lockheed Martin Corp., Northrop Grumman Corp., General Dynamics Corp. and
Raytheon Corp. 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. The Company believes that it has a good reputation with its customers
for quality and delivery of its products and services.

The Company's renewed focus on military programs resulted in increased orders in
the last half of the 2001 fiscal year, including a follow-on order from
Computing Devices, Canada (CDC) - part of General Dynamics - for the IRIS
program, an order from the Northrop-Grumman Corporation for an AWACS program
upgrade and for the U.S. Army for the Patriot missile program. Shipment for
these orders increased revenues for the quarter ended October 28, 2001. Some of
the shipments for these programs took place in the fourth quarter when they were
actually scheduled for the first quarter of 2002, leaving a small backlog
leading into the new year.

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.

The Company believes that it will benefit from a trend of increasing DoD budget
forecasts. 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.

While we project growth in 2002, we also foresee periods of light activity
throughout the year. During the years where military/defense business was
de-emphasized, the Company did not perform the marketing efforts required to
position itself for non-military business. Many of the programs in which we
currently participate are on the downward cycle, including the IRIS program (dot
matrix and thermal printers) and the Northrop-Grumman (trackballs) program. We
expect a short lag between the end of the older programs and the beginning of
contracts resulting from our current marketing labors.

Vizzix(TM) Systems
------------------

Vizzix Systems is re-focusing its efforts to capitalize on opportunities in the
graphics and traffic sign industries. In April 2001, the Company signed an
agreement with Erich Utech, KG, a German company, to jointly develop a printer
optimized for the traffic sign industry. To date that effort has not moved
forward. In June 2001, the provision in the 3M "Global Agreement" providing
exclusivity to 3M for the Digital License Plate(DLP) industry expired. Vizzix
Systems began to market its products and services directly to the United States
and Mexico. In addition, Vizzix began to work with other participants in the DLP
and transportation sign industry. It developed a new graphical user interface,
dubbed SizzleWare to facilitate user-friendliness. In January 2002, DataMetrics
granted a perpetual exclusive license to 3M for the "vehicle registration and
identification" market. The Company received $1,900,000 in cash for the license
and related Condor(TM) inventory and ceased operations in the vehicle
registration and identification market.


                                                                               2
<PAGE>

DataMetrics Commercial Airline Products
---------------------------------------

The Company's principal product for commercial avionics is its model 4680
printer. In August 2001, DataMetrics entered into an exclusive distribution
agreement with DAC International of Austin, TX to exclusively distribute cockpit
printers manufactured by DataMetrics to the airline industry worldwide. The
agreement includes an initial stocking package worth $250,000, for which a
purchase order has been processed by DataMetrics. While the tragic events of
September 11, 2001 has significantly slowed commercial airlines investment in
new aircraft and avionics upgrades, the Company remains confident that the
association with DAC will be very beneficial. DAC and DataMetrics are discussing
the possibility of an aircraft facsimile machine specifically designed for the
corporate and business jet marketplace. The association with DAC is part of a
plan to focus our sales/marketing/engineering/manufacturing efforts.


                                                                               3
<PAGE>

SERVICE

Pursuant to maintenance agreements, repair orders or warranty provisions, the
Company generally services its printers with its own employees at its facility.
The Company sells in-house, non-warranty repairs and maintenance service. 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.

The Company also sells spare parts and 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 29, 2000 and October 28, 2001 was approximately $1,303,000 and $595,259,
respectively. The entire backlog as of October 28, 2001 is expected to be
delivered during the fiscal year ending October 27, 2002.

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 suppliers for components used in its ruggedized
computer devices and peripherals. In the event any of these relationships are
not maintained, 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.

MARKETING

     DataMetrics has developed a new marketing group of employees comprised of
experienced technical professionals who are familiar with the agencies and
companies which make up our market. DataMetrics also uses independent
manufacturer sales representatives where it is deemed applicable and cost
effective both domestically and abroad.

ENVIRONMENTAL EXPOSURE

     DateMetrics is an environmentally responsible member of the community. We
use no hazardous materials in our products or our production process. 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.

COMPETITION

     The Company competes in each of its target markets with other companies,
principally Carlo Gavazzi, Inc. and Miltope Corporation. Our competitors 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 Condor and Harrier 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.

     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.


                                                                               4
<PAGE>

EMPLOYEES

     The Company employed 43 persons on a full-time basis as of October 28,
2001, compared to 49 persons on a full-time basis as of October 29, 2000. A
union does not represent any of the Company's employees nor is the Company
subject to a collective bargaining agreement. The Company's considers relations
with its employees to be good.

OTHER MATTERS

     The business of the Company is not seasonal.

     DataMetrics was incorporated in California in October 1962 and was
reincorporated in Delaware in April 1987. The Company's corporate offices and
manufacturing facilities are located at 1717 Diplomacy Row, Orlando, Florida
32809.

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.

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


                                                                               5
<PAGE>

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.

      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
a total of $850,000 in cash and issued 150,000 shares of Common Stock,
concurrent with the release, 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. 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. Under the terms of the Agreement, the additional shares required to
be issued is approximately 2.7 million shares, which shares have not been issued
as of October 28, 2001.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     In December 2001, security holders owning a majority of the outstanding
shares of common stock approved a one-for-twenty reverse stock split and an
amendment to the Certificate of Incorporation to increase the number of
authorized shares of common stock to 800,000,000 and preferred stock to
40,000,000. The Company is preparing an information statement for distribution
to its shareholders. The reverse split and amendment will be effective after
distribution of the information statement.

                                     PART II

ITEM 5. MARKET FOR DATAMETRICS' COMMON STOCK AND RELATED STOCKHOLDER MATTERS.

     DataMetrics' Common Stock has been listed on the American Stock Exchange
(Symbol "DC") from July 1998 through June 2000, at which time it became listed
on Over The Counter Bulletin Board (Symbol "DMTR"). The high and low sales for
the Common Stock are set forth in the following table.

Fiscal 2002 Quarter Ended                             High            Low
-------------------------                            -------        -------
January 30 .......................................   $0.0900        $0.0350

Fiscal 2001 Quarter Ended                             High            Low
-------------------------                            -------        -------
January 30 .......................................   $0.2200        $0.0700
April 30 .........................................   $0.1850        $0.0700
July 30 ..........................................   $0.0800        $0.0400
October 31 .......................................   $0.0950        $0.0450

Fiscal 2000 Quarter Ended                             High            Low
-------------------------                            -------        -------
January 30 .......................................   $1.7500        $0.9375
April 30 .........................................   $1.1250        $0.5000
July 30 ..........................................   $0.6875        $0.7000
October 29 .......................................   $0.3300        $0.0550

     There were approximately 724 stockholders of record as of October 28, 2001.

      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.


                                                                               6
<PAGE>

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 those
actual events or results may differ materially.

RESULTS OF OPERATIONS

      Fiscal Year 2001 Compared With Fiscal Year 2000.

      Sales for the year ended October 28, 2001 were $4,667,000, an increase of
$1,823,000 or 64% compared with sales of $2,844,000 in the prior fiscal year.
The increase in sales is attributable to the aggressive reentry into the
military market and cultivation of long-standing relationships with major
customers like Lockheed Martin, Northrop Grumman, Computing Devices Canada and
the Defense Supply Center.

      Cost of sales excluding scrap and writedown of inventory for fiscal 2001
was $3,993,000 (86% of sales); a decrease of $870,000 or 18% compared with
$4,863,000 (171% of sales) for the prior fiscal year. Cost of sales included
significant writedowns of inventory after this evaluation which was considered
to be slow moving and obsolete. A great deal of inventory after this analysis
was disposed of. More conservative inventory policies have been implemented.
$2,388,000 of inventory has been scrapped and or written off consistent with our
move to assess the net realizable value of the inventory and comply with
Generally Accepted Accounting Principles.

      Selling, general and administrative expenses for the year ended October
28, 2001, were $1,981,000 (43% of sales) a decrease of $718,000 or 16%, compared
with $2,699,000 (95% of sales) for the same period in the prior fiscal year. The
decrease was due to a reduction in administrative staff and general cost control
procedures implemented.

      Net interest expense was $1,031,000 for the year ended October 28, 2001
compared with net interest expense of $1,747,000 for the prior year. This
decrease is due to the debt restructure which commenced in January, 2001.

      There was an extraordinary event in the form of a collection on a key man
life insurance policy on the Company's former chairman early in the year. The
net proceeds amounted to $1,046,000.

      The net loss for the year ended October 28, 2001 amounted to $5,361,000, a
decrease of $2,770,000 compared with a loss of $7,897,000 for the prior fiscal
year. The loss for the current period is attributable to the Company's decision
in the prior period to withdraw from the military/defense business. The reversal
and reentry into this market has been difficult. DataMetrics is currently
building a sales and marketing team to develop this market once again.

      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 28, 2001. Ultimate recognition of these tax
assets is dependent, to some extent, on the future revenue levels and margins of
the Company. It is the intention of management to assess the appropriate level
for the valuation allowance each quarter.


                                                                               7
<PAGE>

      Fiscal Year 2000 Compared With Fiscal Year 1999:

      Sales for the year ended October 29, 2000 were $2,844,000, a decrease of
$5,716,000 or 69% compared with sales of $8,560,000 in the prior fiscal year.
The decrease in sales is attributable to the Company's decision to withdraw from
the military defense business, although that decision has now been reversed.

      Cost of sales for fiscal 2000 was $4,863,000 (171% of sales); a decrease
of $229,000 or 5% compared with $5,092,000 (60% of sales) for the prior fiscal
year. Cost of sales decreased slightly despite a significant decrease in sales
compared to the prior fiscal year because of lower gross margin product mix as
well as the Company functioning at a lower capacity than the previous year.

      During fiscal 2000, the Company recorded a write down of its inventory of
$1,450,000 due to changes in business direction. During fiscal year 1999, the
Company recorded a $2,000,000 write down of its military inventory related to
its decision to withdraw from the military defense business.

      Selling, general and administrative expenses for the year ended October
29, 2000 were $2,699,000 (95% of sales) a decrease of $1,990,000 or 42%,
compared with $4,689,000 (55% of sales) for the same period in the prior fiscal
year. The decrease is due to lower administrative and support staff expenses
throughout the Company.

      In the prior year the Company incurred lease settlement expenses of
$1,225,000. There was no such expense in the current period.

      Net interest amounted to $1,747,000 for the year ended October 29, 2000
compared with net interest expense of $1,259,000 for the prior year. This
increase is due to higher outstanding borrowings and higher amortization of
original issue discount from warrants issued in connection with certain
borrowings.

      The net loss for the year ended October 29, 2000 amounted to $7,897,000,
an increased loss of $1,179,000 compared with a net loss of $6,718,000 for the
prior fiscal year. The loss for the current period is attributable to the
Company's decision to withdraw from the military/defense business (which
decision has been reversed), write down of inventory and the start-up expenses
for MadeMyWay.

      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 29, 2000. Ultimate recognition of these tax
assets is dependent, to some extent, on the future revenue levels and margins.
It is the intention of management to assess the appropriate level for the
valuation allowance each quarter.

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 formerly relied primarily on internally generated funds, private
placement proceeds, subordinated debt and other bank debt to finance its
operation. The Company's liquidity and cash resources are significantly impaired
by ongoing losses and significant reductions in revenues. The opinion of the
Company's auditors contains an explanatory paragraph regarding the Company's
ability to continue as a going concern.

      Net cash used in operations was $2.5 million and $2.2 million in 2001 and
2000, respectively. The change from 2000 to 2001 was due to ongoing losses and
reentry into the military market.


                                                                               8
<PAGE>

     Net cash provided by (used in) investing activities was $.02 million and
$.8 million in 2001 and 2000, respectively. The expenditure for capital
equipment was severely curtailed.

     Net cash provided by financing activities was $2.8 million and $1.3 million
in 2001 and 2000, respectively. The change from 2000 to 2001 was primarily
related to the debt restructuring in the first quarter. It was enhanced later in
the second quarter with a senior convertible debt issue for $1.025 million.

     The Company continues to have substantial debt due in 2002 and 2003, which
debt cannot now be repaid from cash or other proceeds from operations. As a
result, additional capital is required to meet its debt obligations and satisfy
operating expenses in the short term.

     Effective January 31, 2001, DMTR LLC (an entity whose managing member is
Bruce Galloway, the Company's Chairman) provided the Company with a line of
credit in the maximum amount of $798,860 (the "Line of Credit"). Accordingly,
the Company (assuming a draw of the entire Line of Credit) is obligated to DMTR
in the aggregate amount of $3,600,000 (comprised of $1,496,140 on the senior
bank loan assigned from Branch Banking and Trust Company (the "Senior Bank
Loan"), $1,305,000 on certain bridge financings and $798,860 on the Line of
Credit). The Line of Credit has a term of two years with interest (payable
monthly) at the Base Rate of Citibank, N.A. plus 100 basis points and is secured
by all assets of the Company, a pledge of the Company's stock in MadeMyWay and
the assets of MadeMyWay. To the extent such assets and stock are pledged to
secure the Senior Bank Loan and the Bridge Financings, the security for the Line
of Credit is subject to such prior security interests. The Company is also
obligated to make mandatory prepayments of the principal of the Line of Credit
on a monthly basis to the extent the Company has available cash in excess of
$200,000. Simultaneously with the closing of the Line of Credit, DMTR agreed to
modify the terms of the Senior Bank Loan and the Bridge Financings to conform
those terms to the terms of the Line of Credit. Therefore, the Senior Bank Loan
and the Bridge Financings mature on January 31, 2003, accrue interest (payable
monthly) at the Base Rate of Citibank N.A. plus 100 basis points and are subject
to the mandatory prepayment provision set forth in the Line of Credit. As
additional consideration for the financings provided by DMTR, the Company issued
a Warrant to DMTR to acquire up to 7,000,000 shares of the common stock on a
fully diluted basis with an exercise price of $1.00 per share, exercisable
through January 31, 2007. Such issuance gives effect to the company's proposed
one-for-20 reverse stock split. DMTR has exchanged $700,000 in principal amount
of the Bridge Financings for the issuance of 14,000,000 shares of common stock
(with demand registration rights), such number of shares determined on a
proposed pre-reverse stock split basis.

     The Company has reached an agreement with 96% of the holders of the 10%
Subordinated Notes dated December 24, 1998 in the aggregate principal amount of
$3,524,000 as of December 31, 2000 (the "10% Notes") to exchange each $1.00 face
amount of the outstanding 10% Notes and accrued interest for shares of common
stock. The Company will issue approximately 5,019,434 shares of common stock
upon the effectiveness of the proposed reverse stock split. Such issuance gives
effect to the Company's proposed one-for-20 reverse stock split.

     The Company has reached an agreement with the holders of its 12% Senior
Subordinated Convertible Secured Notes dated August 2, 1999 in the aggregate
principal amount of $2,835,607 as of December 31, 2000 (the "12% Notes") to
exchange 1.1 shares of the Company's common stock for each $1.00 in principal of
the outstanding 12% Notes. The Company will issue approximately 3,200,000 shares
of common stock upon the effectiveness of the proposed reverse stock split. Such
issuance gives effect to the Company's proposed one for 20 reverse stock split.
When the exchange is consummated, the holders of the 10% Notes and the 12% Notes
will waive all amounts owing in respect of the notes, whether of principal,
interest, premium or penalty.

     In April 2001, the Company issued Senior Priority Convertible Notes in the
principal amount of $1,025,000. The notes are convertible into shares of common
stock and secured against all of the Company's assets. Such security is senior
to that of DMTR, LLC. The maturity date of the Notes is two years from date of
issue. The interest rate on the notes is ten (10%) percent per annum. Upon the
effectiveness of the one-for-20 reverse stock split, the Notes shall be
converted into 4,000,000 shares of common stock on a post split basis and the
investors shall be issued warrants to purchase 4,000,000 shares of common stock
at an exercise price of $.32 per share. The Company used the proceeds of this
offering for general working capital purposes.

     In January 2002, the Company granted 3M an exclusive license for the
"vehicle registration and identification" market and sold certain related
equipment for $1,900,000. The Company intends to use the proceeds for marketing
expenses and for its restructuring.


                                                                               9
<PAGE>

RECENT ACCOUNTING STANDARDS

      A detailed explanation of Recent Accounting Standards and their effects on
the financial statements can be found in the notes to the financial statements.


                                                                              10
<PAGE>

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 renegotiations and the intense competition for available defense
business.

ITEM 7. SELECTED FINANCIAL DATA.

     The financial statements are included as a separate section following the
signature page to this Form 10-KSB.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

     On September 19, 2001 BDO Seidman, LLP (the "former accountant") notified
the Company that the client-auditor relationship had ceased. The former
accountant had served as the Company's independent public accountant for two
years ended October 29, 2000 its withdrawal. The former accountant's report on
the financial statements for the past two years did not contain as adverse
opinion or a disclaimer of opinion. There were no disagreements with the former
accountant on any matter of accounting principles or practices, financial
statement disclosures or auditing scope or procedure.

     The Company engaged Davis, Monk & Company to replace the Company's former
accountant as the Company's independent public accountant.

                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS

     Management is vested in DataMetrics' Board of Directors and officers. The
Board of Directors is divided into three classes with two members in Class I
(Bruce Galloway and Daniel Bertram), two members in Class II (Gary Herman and
Thomas Leonardis) and two members in Class III (Douglas Friedenberg and James
Youngblood). Each class is elected for a term of three years at each annual
meeting, shareholders elect Directors to succeed those Directors in the class
whose term expires at that annual meeting. Each newly elected Director holds
office until the third succeeding annual meeting and until the election and
qualification of his or her successor. The officers of the Company hold office
at the discretion of the Board of Directors. There was no annual meeting of
shareholders in 2001.

     The Board of Directors and executive officers of the Company and their
respective ages are set forth in the table below. Also provided is a brief
description of the business experience of each Director and executive officer
during the past five years and an indication of directorships (if any) held by
each Director in other companies subject to the reporting requirements under the
Federal securities laws.

     Name                  Age       Title
     ----                  ---       -----

Bruce R. Galloway          44       Chairman, Director
Daniel Bertram             41       Chief Executive Officer, Director
Phillip E. Lambert         53       Chief Accounting Officer
Gary Herman                37       Secretary, Director
Douglas S. Friedenberg     50       Director
Thomas Leonardis           58       Director
James Youngblood           67       Director


                                                                              11
<PAGE>

BUSINESS EXPERIENCE

      Bruce R. Galloway, Chairman of the Board. Mr. Galloway has been Chairman
of the Board since August 2000. Mr. Galloway is currently a managing director of
Burnham Securities Inc., a New York-based investment bank. Prior to joining
Burnham in 1993, Mr. Galloway was a senior vice president at Oppenheimer &
Company, a New York-based an investment bank, from 1991 through 1993. Mr.
Galloway holds a B.A. degree in Economics from Hobart College and an M.B.A. in
Finance from New York University's Stern Graduate School of Business. He is also
the Chairman of International Microcomputer Software, Inc. and Digital Systems
Group Inc., as well as a director of Waiter.com.

      Daniel Bertram, Chief Executive Officer. Mr. Bertram became CEO of the
Company in May 2001 after serving as Vice President for Marketing and Sales
since March 2001. Mr. Bertram was a principal of Conesys, Inc. from 1998 through
February 2001. From 1997 through 1998 he was a principal of Bertram Co., a
consulting firm. He served as Vice President for Sales and Customer Support for
Staefa Control System (now a Siemens Company) from 1991 to 1996. Prior to his
work at Staefa, he served as Regional Distribution Manager for
Telemecanique/Square D, a U.S. subsidiary of Groupe Schneider, France, a global
leader in Industrial Automation Systems and Components, where he grew its
representative network in 13 western states. He was also Northeast Regional
Marketing Manager for Leroy-Somer, Inc. (now a division of Emerson Electric).
Mr. Bertram holds a Master of Arts in Industrial/Organizational Psychology from
Pepperdine University, and a Bachelor of Arts from Marquette University.

      Phillip Lambert, Chief Accounting Officer. Mr. Lambert became Chief
Accounting Officer in July 2001. He previously worked in private practice as an
accountant from 1997 through February 2001. He was Chief Financial Officer of
ThermoPlastics Composite Design, Inc. from 1993 through 1997. He previously
worked for 20 years as a financial manager in the defense industry with Lockheed
Martin, Litton Industries and several other large defense contractors. His
primary focus has been in financial reporting and planning but additional
functions performed included contracts and management information systems. He is
a CPA in the State of Florida and has experience with SEC reporting and
compliance.


                                                                              12
<PAGE>

      Gary Herman, Director. Mr. Herman has been a director of the Company since
August 2000. He is an Associate Managing Director in the Galloway Division at
Burnham Securities, Inc., a New York-based investment bank. Prior to joining
Burnham, Mr. Herman was a managing partner of The Kingshill Group, Inc., a
merchant banking firm with offices in New York and Tokyo. He is currently the
chairman of the Board and Chief Executive Officer of Digital Creative
Development Corporation and Chairman of Novex Systems, Comstar Interactive
Corp., a director of Heavy Com, Inc. and the NYC Industrial Development Agency.

      Doug Friedenberg, Director. Mr. Friedenberg has been a director of the
Company from October 1996 through June 2000 and from August 2000 to the present.
From July 1991 through March 1993, Mr. Friedenberg was the President of Unicorn
Capital Management, a hedge fund manager. Mr. Friedenberg is a Director of Novex
Systems.

      Thomas Leonardis, Director. Mr. Leonardis has been a director since
November 2001. He is President & CEO of Channel Resources, Inc., a consulting
firm. He is a senior executive with experience with companies such as Staefs
Control System and Time Energy. Management experiences span general management,
sales and marketing, and operations. He has international business experience in
Europe, Asia and Latin America.

      James Youngblood, Director. Mr. Youngblood has forty-five years of
experience in the computer peripheral field. He has fifteen years of experience
in the commercial field and thirty years in military products. Prior to joining
DataMetrics, he was the President of Peripheral Equipment Corporation (PEC).
Prior to PEC, he was Director of International Operations of DataMetrics
Corporation from 1989 to 1996.

      The audit committee of the Company is comprised of Douglas S. Friendenberg
and Thomas Leonardis.

BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and persons who own more than ten percent of the Company's
common shares to file reports of ownership with the SEC and to furnish the
Company with copies of these reports. Based solely upon its review of reports
received by it, or upon written representations from certain reporting persons
that no reports were required, the Company believes that during fiscal year 2001
all filing requirements were met.


                                                                              13
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

      The following table shows, for the fiscal year ended October 28, 2001, the
compensation earned by the current Chief Executive Officer of the Company and
two named executive officers.


                                                                              14
<PAGE>

                           SUMMARY COMPENSATION TABLE
                               ANNUAL COMPENSATION

<TABLE>
<CAPTION>
                                                                         Long Term Compensation
                                                                         ----------------------
                                                                         Awards                        Payouts
                                                                         ------                        -------
                                                                                         Securities
                                                                                         Underlying
                                                         Other           Restricted      Options and                   All Other
Name and                   Fiscal    Base                Annual          Stock Award(s)  Warrants      LTIP** Payouts  Compensation
Principal Position         Year      Salary      Bonus   Compensation    ($)             (#)           ($)             ($)
------------------         ------    ---------   -----   ------------    -----------     ---------     -------         ------------
<S>                        <C>       <C>         <C>     <C>             <C>             <C>           <C>             <C>
Daniel Bertram(1)(2)       2001      $ 144,000   -       $ 7,200(3)      -               3,000,000(5)  -               4,231(4)
Phillip E. Lambert         2001      $  65,000   -       -               -               -                             -
James Youndblood           2001      $ 100,000

</TABLE>


                                                                              15
<PAGE>

                     Option/SAR* Grants in Last Fiscal Year
                               (Individual Grants)

<TABLE>
<CAPTION>

                     Number of Securities       Percent of Total Options/SARs
                     Underlying Options/SARs    Granted to Employees in
Name                 Granted (#)                Fiscal Year                      Exercise or Base Price     Expiration Date
-----------------    -----------------------    -----------------------------    ----------------------     ---------------
<S>                  <C>                        <C>                              <C>                        <C>
Daniel Bertram       3,000,000                  100%                             1.0                        -
</TABLE>

*Stock Appreciation Rights (SARs) refers to SARS payable in cash or stock
including SARs payable in cash or stock at the election of the Company.

**LTIP means any plan providing compensation intended to serve as incentive for
performance to occur over a period longer than one fiscal year.

(1)  Hired March 2001.
(2)  Promoted to CEO, June 2001.
(3)  Car allowances.
(4)  Bonus.
(5)  Granted option in July 2001 for 3,000,000 shares.


                                                                              16
<PAGE>

           Long-Term Incentive Plans - Awards in the Last Fiscal Year

None


                                                                              17
<PAGE>

DIRECTOR COMPENSATION

      On February 28, 2002, the Company awarded options to purchase shares of
common stock to Messrs. Bertram, Galloway, Herman and Friedenberg. The options
are exercisable following the effectiveness of the Company's one-for-20 reverse
stock split for a period of 5 years at an exercise price equal to 50% of the
average closing bid price per share of common stock for the first 30 trading
days after the effectiveness of the reverse split. Messrs. Bertram and Galloway
each received options for 2,041,365 shares of common stock on a post split basis
as management incentive options. Messrs. Herman and Friedenberg received options
for 765,512 and 255,171 shares respectively on a post split basis in
consideration for their work in the restructuring of the Company's capital
structure in 2001 and 2002.

EMPLOYMENT AGREEMENTS

      Pursuant to an agreement with the Company dated June 2001, Daniel Bertram
has agreed to serve two years as the President/Chief Executive Officer. His
annual salary is $144,000. He also receives a monthly automobile allowance, the
Company's benefit package and housing in Florida which the Company leases for
$1,200 per month. He will receive stock options and bonuses as determined by the
Board of Directors.


                                                                              18
<PAGE>

ITEM 11. PRINCIPAL SHAREHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT

     The following table sets forth, as of March 7, 2002, the number and
percentage of shares of the Company's Common Stock owned beneficially, by class
and on a combined basis, by (i) each current director, (ii) each executive
officer, (iii) all executive officers and directors as a group, and (iv) each
person who is known by us to own beneficially more than 5% of our Common Stock.
Except as otherwise indicated, the beneficial owners listed in the table have
sole voting and investment powers with respect to the shares.

Name and Address of               Number of Shares         Percent of Shares
Beneficial Owner                  Beneficially Owned       Beneficially Owned
------------------------         --------------------      -------------------
Bruce R. Galloway (1)(2)              15,040,740                  37.8
Daniel Bertram (1)(3)                  3,179,000                   7.5
Douglas Friedenberg (1)(4)                90,752                  --
James Youngblood (5)                   5,095,381                  11.3
Gary Herman (1)(6)                             0                   0
Thomas Leonardis (1)                           0                   0
QuilCap Corp. (7)                      5,500,000                  12.3
Headwaters Capital, LLC (8)            5,000,000                  11.2

All Executive Officers &
 Directors as a Group                 23,680,374                  --

Notes:

(1)  The address of each of these persons is c/o DataMetrics Corporation, 1717
     Diplomacy Row, Orlando, Florida 32809.

(2)  Includes 276,719 shares of common stock over an account which Mr. Galloway
     has indirect beneficial ownership, 221,119 shares of which are to be issued
     to Mr. Galloway in exchange for $201,018 in principal amount of
     indebtedness owing to Mr. Galloway under a certain 12% Subordinated
     Convertible Secured Note (the "12% Notes") issued to Mr. Galloway. Includes
     5,000 shares owned by Mr. Galloway's wife, Sara Herbert Galloway and 20,000
     shares over an account which Mr. Galloway's wife has indirect beneficial
     ownership. Includes 39,021 shares to be issued to Mr. Galloway in exchange
     for $35,474 in principal amount of indebtedness owing to Mr. Galloway under
     the 12% Notes. Includes 14,000,000 shares of common stock owned by DMTR,
     LLC, ("DMTR") of which Mr. Galloway is managing member. Does not include a
     Warrant issued to DMTR to purchase 7,000,000 shares of Common Stock at
     $1.00 per share after giving effect to the proposed stock split and options
     issued to Mr. Galloway for 2,041,365 shares of common stock on a post split
     basis at an exercise price equal to 50% of the average closing bid price
     per share of common stock for the first 30 trading days after the
     effectiveness of the reverse split.


                                                                              19
<PAGE>

(3)  Includes 3,000,000 shares of Common Stock underlying certain options
     exercisable at a price of $.05 per share. These options to purchase up to
     3,000,000 shares of Common Stock were issued to Mr. Bertram as part of his
     compensation for serving as CEO of the Company. Does not include options to
     purchase $2,041,365 shares of common stock on a post split basis at an
     exercise price equal to 50% of the average closing bid price per share of
     common stock for the first 30 trading days after the effectiveness of the
     reverse split.

(4)  Does not include options for 255,171 shares of common stock on a post-split
     basis at an exercise price equal to 50% of the average closing bid price
     per share of common stock for the first 30 trading days after the
     effectiveness of the reverse split.

(5)  Includes warrants to purchase 5,058,030 shares of common stock at an
     exercise price of $.07 per shares issued to a family trust of which Mr.
     Youngblood is a trustee in connection with the acquisition of Peripheral
     Equipment Corporation in November 2001.

(6)  Does not include options for 765,512 shares of common stock on a post-split
     basis at an exercise price equal to 50% of the average closing bid price
     per share of common stock for the first 30 trading days after the
     effectiveness of the reverse split.

(7)  Includes warrants to purchase 5,500,000 shares of common stock at an
     exercise price of $.06 per share.

(8)  The address of Headwaters Capital, LLC is 220 Montgomery Street, Suite 500,
     San Francisco, California 94965.

     The Company knows of no arrangement which may result in a change in control
of the Company.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     During the last two fiscal years, certain of DataMetrics' executive
officers and Directors have engaged in transactions with DataMetrics from time
to time. Except as set forth below, these transactions involved (i) the purchase
of Common Stock and Warrants to purchase Common Stock in connection with various
private placements on terms and conditions no different than those afforded to
other investors, or (ii) amounts not exceeding $60,000.


                                                                              20
<PAGE>

     On August 18, 2000, Daniel P. Ginns resigned as a Director, Chairman and
Chief Executive Officer of the Company and as a Director and Officer of
MadeMyWay, a subsidiary of the Company. Except for certain non-compete,
confidentiality and indemnification provisions that survive, Mr. Ginns' Amended
Employment Agreement with the Company is terminated. In exchange for the
cancellation of Warrants held by Mr. Ginns, the Company agreed to pay Mr. Ginns
$100,000 and issue to Mr. Ginns 500,000 shares of the Company's Common Stock.
Subject in all events to disposition restrictions under applicable securities
laws, Mr. Ginns may dispose of up to 125,000 of such shares of Common Stock in
any quarterly period. If Mr. Ginns disposes of fewer that 125,000 shares in any
quarter, he may in addition dispose of such shortfall in any subsequent quarter.

     The Company's senior secured bank facility with Branch Banking & Trust
Corporation in the amount of $1,496,140 was in default. In August 2000, the Bank
drew on a standby letter of credit posted by Roy and Carl Doumani, as
guarantors, in full satisfaction of the Company's obligations to the Bank and
assigned the loan documents and collateral to the Doumanis. An investment group
headed by Bruce Galloway, DMTR, LLC, a New York limited liability company
("DMTR"), satisfied all obligations under those loan documents owing to the
Doumanis, and DMTR has taken an assignment of the loan documents and the
collateral securing that loan. In addition, DMTR has repaid in December all of
the Company's Bridge Financings in the aggregate amount of $1,305,000 plus
interest thereon and taken an assignment of the loan documents evidencing the
Bridge Financings and an assignment of the collateral securing the Bridge
Financings.

     Effective January 31, 2001, DMTR and the Company executed loan documents to
provide the Company with a line of credit in the maximum amount of $798,860 (the
"Line of Credit"). Accordingly, the Company (assuming a draw of the entire Line
of Credit) is obligated to DMTR in the aggregate amount of $3,600,000 (comprised
of $1,496,140 on the senior bank loan assigned from Branch Banking and Trust
Company, $1,305,000 on certain bridge financings and $798,860 on the Line of
Credit). The Line of Credit has a term of two years with interest (payable
monthly) at the Base Rate of Citibank, N.A. plus 100 basis points and is secured
by all assets of the Company, a pledge of the Company's stock in MadeMyWay and
the assets of MadeMyWay. To the extent such assets and stock are pledged to
secure the Senior Bank Loan and the Bridge Financings, the security for the Line
of Credit is subject to such prior security interests. The Company is also
obligated to make mandatory prepayments of the principal of the Line of Credit
on a monthly basis to the extent the Company has available cash in excess of
$200,000. Simultaneously with the closing of the Line of Credit, DMTR agreed to
modify the terms of the Senior Bank Loan and the Bridge Financings to conform
those terms to the terms of the Line of Credit. Therefore, the Senior Bank Loan
and the Bridge Financings mature on January 31, 2003, accrue interest (payable
monthly) at the Base Rate of Citibank N.A. plus 100 basis points and are subject
to the mandatory prepayment provision set forth in the Line of Credit. As
additional consideration for the financings provided by DMTR, the Company issued
a Warrant to DMTR to acquire up to 7,000,000 shares of the Common Stock of the
Company on a fully diluted basis with an exercise price of $1.00 per share,
exercisable through January


                                                                              21
<PAGE>

31, 2007. Such issuance gives effect to the company's proposed reverse stock
split. DMTR has exchanged $700,000 in principal amount of the Bridge
Financings for the issuance of 14,000,000 shares of common stock
(with demand registration rights), such number of shares determined on a
proposed post reverse stock split basis.


                                                                              22
<PAGE>

     Gary Herman is the Chairman and Chief Executive Officer of Digital Creative
Development Corporation ("DCDC"). In March 2000, DCDC purchased 600,000 shares
of common stock of MadeMyWay, a subsidiary of the Company, for $1,200,000.
Pusuant to the purchase agreement, such 600,000 shares of common stock are
convertible into 2,000,000 of the Company's common stock. In addition, in
November 2000, DCDC advanced $180,000 of $1,305,000 in bridge loans of the
Company. Such amount has been repaid to DCDC.

      On December 7, 2001, the Company executed a letter agreement with QuilCap
Corp. ("QuilCap") whereby QuilCap sold certain Subordinated Promissory Notes
(the "Notes") held by three investment funds controlled by QuilCap for an
aggregate purchase price of $319,184 (the "Purchase Price"). The Purchase Price
of the Notes represented an 85% discount of the $2,127,896 aggregate principal
amount of the Notes, which were originally purchased by QuilCap in 1998. As
additional consideration for the purchase of the Notes, the Company issued the
three funds warrants to purchase an aggregate of 5,500,000 shares of the
Company's Common Stock at a price of $.06 per share. The Notes were purchased by
certain employees of the Company with funds advanced by the Company.

     On February 28, 2002, the Company awarded options to purchase shares of
common stock to Messrs. Bertram, Galloway, Herman and Friedenberg. The options
are exercisable following the effectiveness of the Company's one-for-20 reverse
stock split for a period of 5 years at an exercise price equal to 50% of the
average closing bid price per share of common stock for the first 30 trading
days after the effectiveness of the reverse split. Messrs. Bertram and Galloway
each received options for 2,041,365 shares of common stock on a post split basis
as management incentive options. Messrs. Herman and Friedenberg received options
for 765,512 and 255,171 shares respectively on a post split basis in
consideration for their work in the restructuring of the Company's capital
structure in 2001 and 2002.

                                                                              23
<PAGE>

                                     PART IV

                             DATAMETRICS CORPORATION
                  10-KSB for fiscal year ended October 28, 2001

(a)                 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).

4.5   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.)

4.6   Form of 10% Subordinated Note (incorporated by reference to Exhibit 4.5 to
      the Registrant's Form 8-K dated December 24, 1998).

4.7   Form of Registration Rights Agreement (incorporated by reference to
      Exhibit 4.6 to the Registrant's Form 8-K dated December 24, 1998).

                                                                              24
<PAGE>

4.8   Form of Common Stock Subscription Agreement (incorporated by reference to
      Exhibit 4.7 to the Registrant's Form 8-K dated December 24, 1998).

4.9   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).

4.10  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).

4.11  Form of Warrant (incorporated by Reference to Exhibit 4.3 to the
      Registrant's 8-K dated May 7, 1999).

4.12  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).

4.13  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).

4.14  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).

4.15  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).

4.16  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).

4.17  Warrant issued to Carl K. Doumani (incorporated by reference to Exhibit
      4.1 to the Registrant's 8-K dated September 13, 1999).

4.18  Warrant issued to Roy Doumani (incorporated by reference to Exhibit 4.2 to
      the Registrant's 8-K dated September 13, 1999).

4.19  Form of Warrant issued to finder (incorporated by reference to Exhibit 4.3
      to the Registrant's 8-K dated September 13, 1999).

4.20  Warrant to purchase 7,000,000 shares of common stock issued to DMTR, LLC

4.21  Exchange Offering Statement dated February 8, 2001 in respect of the
      Company's 12% Subordinated Convertible Secured Notes.

4.22  Form of Letter of Acceptance relating to Exchange Offer to holders of the
      Company's 12% Subordinated Convertible Secured Notes.

4.23  Exchange Offering Statement dated February 8, 2001 in respect of the
      Company's 10% Subordinated Notes.

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).

                                                                              25
<PAGE>

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).

10.11 Form of Secured Promissory Note for loan of $480,000.00 (incorporated by
      reference to Exhibit to 10.5 to the Registrant's Form 8-K filed on August
      22, 2000).

10.12 Stock Pledge Agreement dated July 31, 2000 between the Company and Bruce
      Galloway (incorporated by reference to Exhibit to 10.6 to the Registrant's
      Form 8-K filed on August 22, 2000).

10.13 Irrevocable Proxy dated July 31, 2000 (incorporated by reference to
      Exhibit to 10.7 to the Registrant's Form 8-K filed on August 22, 2000).

10.14 Form of Secured Promissory Note for the Second Loan of $210,000.00
      (incorporated by reference to Exhibit to 10.8 to the Registrant's Form 8-K
      filed on August 22, 2000).

10.15 Security Agreement dated August 18, 2000 between MadeMyWay and Bruce
      Galloway, as Collateral Agent (incorporated by reference to Exhibit to
      10.9 to the Registrant's Form 8-K filed on August 22, 2000).

10.16 Pledge Agreement dated August 18, 2000 between the Company and Bruce
      Galloway, as Collateral Agent (incorporated by reference to Exhibit to
      10.10 to the Registrant's Form 8-K filed on August 22, 2000).

10.17 Irrevocable Proxy dated August 18, 2000 (incorporated by reference to
      Exhibit to 10.11 to the Registrant's Form 8-K filed on August 22, 2000).

10.18 Assignment of Life Insurance as Collateral (incorporated by reference to
      Exhibit to 10.12 to the Registrant's Form 8-K filed on August 22, 2000).

10.19 Loan Agreement dated January 31, 2001 between the Company and DMTR, LLC
      (incorporated by reference to the Registrant's Form 10-K filed on February
      13, 2001).

10.20 Secured Promissory Note dated January 31, 2001 issued by the Company to
      DMTR, LLC (incorporated by reference to the Registrant's Form 10-K filed
      on February 13, 2001).

10.21 Modification and Amendment Agreement dated January 31, 2001 between the
      Company and DMTR, LLC (incorporated by reference to the Registrant's Form
      10-K filed on February 13, 2001).

10.22 Modification and Amendment Agreement dated January 31, 2001 between the
      Company and DMTR, LLC (incorporated by reference to the Registrant's Form
      10-K filed on February 13, 2001).

10.23 Exchange Agreement dated as of January 31, 2001 between the Company and
      DMTR, LLC (incorporated by reference to the Registrant's Form 10-K filed
      on February 13, 2001).

10.24 Registration Rights Agreement dated as of January 31, 2001 between the
      Company and DMTR, LLC (incorporated by reference to the Registrant's Form
      10-K filed on February 13, 2001).

10.25 Security Agreement dated January 31, 2001 between the Company and DMTR,
      LLC (incorporated by reference to the Registrant's Form 10-K filed on
      February 13, 2001).

10.26 Security Agreement dated January 31, 2001 between the MadeMyWay.Com, Inc.
      and DMTR, LLC (incorporated by reference to the Registrant's Form 10-K
      filed on February 13, 2001).

10.27 Pledge Agreement dated January 31, 2001 between the Company and DMTR, LLC
      (incorporated by reference to the Registrant's Form 10-K filed on February
      13, 2001).

10.24 Form of Letter of Acceptance relating to Exchange Offer to holders of the
      Company's 10% Subordinated Notes (incorporated by reference to the
      Registrant's Form 10-K filed on February 13, 2001).

10.25 Agreement and Plan of Merger between the Company, PEC and Merger Sub dated
      November 19, 2001 (incorporated by reference from the Form 8-K filed on
      December 5, 2001) (incorporated by reference to the Registrant's Form 10-K
      filed on February 13, 2001).

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


                                                                              26
<PAGE>

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.

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  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).

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).

                                                                              27
<PAGE>

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).

99.9  Press Release (incorporated by reference to Exhibit 99.1 to Registrant's
      Form 8-K filed on August 18, 2000).

99.10 Press Release (incorporated by reference to Exhibit 99.2 to Registrant's
      From 8-K filed on August 18, 2000).

(b) Reports on Form 8-K - None

EXHIBIT 21.1

Subsidiaries of Small Business Issuer
-------------------------------------

1.    MadeMyWay.Com (Became Inactive During The 2001 Fiscal Year And The
      Investment Was Written Off).

2.    Peripheral Equipment Corporation.


                                                                              28
<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 Orlando,
State of Florida, on the 12th day of March, 2002.

                                                 DataMetrics CORPORATION

                                                 /s/ Daniel Bertram
                                                 -----------------------
                                                 Daniel Bertram
                                                 Chief Executive Officer

                                                 /s/ Phillip E. Lambert
                                                 ------------------------
                                                 Phillip E. Lambert
                                                 Controller


     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:

Name                           Title                         Date
------------------------       -----------------------       -----------------

/s/ Daniel Bertram             Chief Executive Officer,      March 12, 2002
------------------------       Director
    Daniel Bertram

/s/ Bruce R. Galloway          Chairman of the Board         March 12, 2002
------------------------
    Bruce R. Galloway

/s/ Gary L. Herman             Secretary, Director           March 12, 2002
------------------------
    Gary L. Herman

/s/ Douglas S. Friedenberg     Director                      March 12, 2002
------------------------
    Douglas S. Friedenberg

                               Director
------------------------
    James Youngblood

                               Director
------------------------
    Thomas Leonardis


                                                                              29
<PAGE>

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                   Form 10-KSB

                                                                         Page

Consolidated Financial Statements

Report of Independent Certified Public Accountants October 28, 2001 .... F-2

Report of Independent Certified Public Accountants October 29, 2000..... F-3

Consolidated Balance Sheet as of October 28, 2001....................... F-4

Consolidated Statements of Operations for the
fiscal years ended October 28, 2001 and October 29, 2001................ F-5

Consolidated Statements of Stockholders' Equity for the
fiscal years ended October 28, 2001 and October 29, 2001................ F-5

Consolidated Statements of Cash Flows for the
fiscal years ended October 28, 2001 and October 29, 2001................ F-7

Notes to the Consolidated Financial Statements.......................... F-8-23


                                       F-1


<PAGE>

                          INDEPENDENT AUDITOR'S REPORT

Board of Directors and Stockholders
DataMetrics Corporation
Orlando, Florida

We have audited the accompanying consolidated balance sheet of DataMetrics
Corporation and Subsidiaries as of October 28, 2001 and the related consolidated
statements of operations, stockholders' equity (deficit), and cash flows for the
year then ended. 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 audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit 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 audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of DataMetrics
Corporation and Subsidiaries as of October 28, 2001 and the results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has incurred significant losses
from operations, and has a stockholders' deficiency that raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 2. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

/s/ Davis, Monk & Company
-------------------------
DAVIS, MONK & COMPANY

Gainesville, Florida
December 14, 2001


                                      F-2


<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
DataMetrics Corporation


      We have audited the accompanying consolidated statements of operations and
cash flows of DataMetrics Corporation and Subsidiaries for the year ended
October 29, 2000. 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 statements of operations and cash flows present
fairly, in all material respects, the result of operations and cash flows of
DataMetrics Corporation and Subsidiaries for the year ended October 29, 2000 in
conformity with generally accepted accounting principles.

The accompanying consolidated 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 significant losses
from operations which raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regards to these matters are
described in Note 2. The accompanying financial statements do not include any
adjustments relating to this matter.

                                              /s/ BDO Seidman, LLP
                                              --------------------
                                              BDO Seidman, LLP

New York, New York
January 16, 2001

(except as to Notes 8 and 9
which are as of February 13, 2001)



                                       F-3

<PAGE>

                    DATAMETRICS Corporation And Subsidiaries
                           Consolidated Balance Sheet
                                October 28, 2001
                                 (in thousands)

<TABLE>
<CAPTION>
<S>                                                                                             <C>
ASSETS
Current assets:
              Cash                                                                              $    246
              Accounts Receivable, net of allowance for doubtful accounts of $50 (Note 1)          1,415
              Inventories, net of allowance for obsolete or slow
                moving inventory of $6,012 (Notes 1 and 4)                                         2,169
              Prepaid expenses and other current assets                                               53
                                                                                                --------

                     Total current assets                                                          3,883
 Property and equipment, at cost: (Note 1)
              Land (Note 7)                                                                          420
              Building and improvements (Note 7)                                                   1,042
              Machinery and equipment                                                                738
              Furniture, fixtures and computer equipment                                           1,186
                                                                                                --------
                                                                                                   3,386
              Less: Accumulated depreciation                                                      (1,649)

                     Net property and equipment                                                    1,737

              Total Assets                                                                      $  5,620
                                                                                                ========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:

              Current maturities of note payable (Note 7)                                       $     26
              Accounts payable                                                                       839
              Accrued expenses                                                                     1,211
                                                                                                --------
                     Total current liabilities                                                     2,076
              Note Payable (Note 7)                                                                  870
              Long-term debt (Notes 8)                                                             6,359
              Loan payable (Note 8)                                                                2,900
              Senior convertible debt (Note 8)                                                     1,025
                                                                                                --------

              Total liabilities                                                                   13,230
                                                                                                --------

Stockholders' deficit: (Note 11)
              Common Stock, $.01 par value; 40,000,000 shares
                authorized; 34,512,227 shares issued and outstanding                                 345
              Additional paid-in capital                                                          46,079
              Accumulated deficit                                                                (54,034)
                                                                                                --------

                   Total stockholders' deficit                                                    (7,610)
                                                                                                --------

              Total Liabilities and Stockholders' Deficit                                       $  5,620
                                                                                                ========
</TABLE>

See accompanying notes to consolidated financial statements


                                      F-4
<PAGE>

                    DataMetrics Corporation And Subsidiaries
                      Consolidated Statement of Operations
                       For The Year Ended October 28, 2001
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                     Fiscal          Fiscal
                                                     Year Ended      Year Ended
                                                     -----------     -----------
                                                     October 28,     October 29,
                                                        2001            2000
                                                     -----------     -----------
<S>                                                     <C>            <C>
 Sales (Note 1)                                         $4,667         $2,844

Cost of Sales
      Purchases, manufacturing and overhead              3,993          4,863
      Scrap and writedown of inventory (Note 4)          2,388          1,450
                                                      --------       --------
                                                         6,381          6,313

Gross (loss) profit                                     (1,714)        (3,469)
Selling, general and administrative expenses            (1,981)        (2,699)

Loss from operations                                    (3,695)        (6,168)

   Interest expense                                     (1,031)        (1,747)
   Loss on refinancing                                  (1,487)
                                                      --------       --------
Total other income and expense                          (2,518)        (1,747)

Loss before minority interest                           (6,213)        (7,915)
Minority interest                                            0             18
                                                      --------       --------
Loss before discontinued operations
    and extraordinary income                            (6,213)       ($7,897)
Loss on disposal of division (Note 15)                    (194)
                                                      --------
Loss before extraordinary income                        (6,407)
Extraordinary income (Note 14)                           1,046
                                                      --------       --------

             Net loss                                   (5,361)       ($7,897)
                                                      ========       ========

Loss per share of common stock:
Basic and diluted                                        $0.25          $0.41
                                                      ========       ========

Weighted average number of common shares outstanding:
Basic and diluted                                       21,240         19,157
                                                      ========       ========
</TABLE>

See accompanying notes to consolidated financial statements


                                      F-5
<PAGE>

                    DataMetrics Corporation And Subsidiaries
            Consolidated Statement of Stockholders' Equity (Deficit)
                      (in thousands, except for share data)

<TABLE>
<CAPTION>
                                                       Common Stock                 Additional                         Total
                                                     ----------------                Paid-In        Accumulated    Stockholders'
                                                     Number of Shares     Amount     Capital          Deficit         Deficit
                                                     ----------------     ------    ----------      -----------    -------------
<S>                                                     <C>                <C>        <C>            <C>               <C>
Balances at October 31, 1999                            18,997,227         $190       $42,703        ($40,776)         $2,117

Sales of equity interest in subsidiary                                                $ 1,182                          $1,182

Issuance of common stock and warrants
   net of issuance costs                                 1,015,000         $ 10       $    87                             $97

Net loss                                                                                              ($7,897)        ($7,897)

Balances at October 29, 2000                            20,012,227         $200       $43,972        ($48,673)        ($4,501)

Conversion of warrants                                     500,000         $  5       $    61                             $66

Issuance of common stock relating to                    14,000,000         $140       $ 2,046                          $2,186
Debt Restructure

Net loss                                                                                              ($5,361)        ($5,361)
                                                        ----------         ----       -------        --------         -------
Balances at October 28, 2001                            34,512,227         $345       $46,079        ($54,034)        ($7,610)
                                                        ==========         ====       =======        ========         =======
</TABLE>

See accompanying notes to consolidated financial statements


                                      F-6
<PAGE>

                    DataMetrics Corporation And Subsidiaries
                      Consolidated Statements of Cash Flows
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                 For the Year Ended
                                                                        -------------------------------------
                                                                        October 28, 2001     October 29, 2000
                                                                        ----------------     ----------------
<S>                                                                        <C>                   <C>
Cash Flows from Operating Activities:
   Net Loss                                                                ($5,361)              ($7,897)
   Adjustments to reconcile net loss to net cash used
   in operating activities:
      Depreciation                                                             298                   328
      Write down of inventory                                                2,388                 1,450
      Non-cash interest and financing costs                                                        1,087
      Other non-cash charges                                                    31
      Minority interest in net loss in subsidiary                                0                   (18)

Changes in assets and liabilities:
   Accounts receivable                                                      (1,342)                2,318
   Inventories                                                                 (85)                   21
   Prepaid expenses and other current assets                                 1,205                   634
   Other assets-current portion long-term debt                                                      (493)
   Accounts payable                                                            174                  (276)
   Accrued expenses                                                            212                   596
                                                                           -------               -------
      Net cash used in operating activities                                 (2,511)               (2,219)

Cash Flows from Investing Activities:
   Capital expenditures for property and equipment                             (25)                 (362)
   Proceeds from sale of equity in subsidiary                                                      1,200
                                                                           -------               -------

      Net cash provided by (used in ) investing activities                     (25)                  838
                                                                           -------               -------

Cash Flows from Financing Activities:
   Proceeds from senior convertible note                                     1,025
   Borrowings on revolving line of credit                                                             46
   Payments on long-term debt                                               (1,320)                  (22)
   Borrowings on loan payable                                                   83                    77
   Proceeds from bridge notes                                                2,900                 1,105
   Proceeds from the issuance of common stock and warrants                      66                    66
                                                                           -------               -------

      Net cash provided by financing activities                              2,754                 1,272

Net (decrease) increase in cash                                                218                  (109)
Cash at the beginning of the period                                             28                   137
                                                                           -------               -------
Cash at the end of the period                                              $   246               $    28
                                                                           -------               -------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Interest paid, net                                                      $   445               $   539
   Non-cash activity:
   Issuance of common stock in exchange for debt relief                    $ 2,252
   Conversion of accrued interest to 12% Subordinated
      Convertible Secured Notes Due 2000                                                         $   305
</TABLE>

See accompanying notes to consolidated financial statements


                                      F-7
<PAGE>

                    DATAMETRICS CORPORATION AND SUBSIDIARIES
                 NOTES TO THE 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 financial statements include the accounts of DataMetrics
Corporation and its wholly- and majority owned subsidiary (collectively, the
"Company"). The subsidiary which the Company had during the year is MadeMyWay.
It ceased operations early in the year and the investments in it was written
off. 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 and is included in accrued
expenses.

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 47% of the Company's sales during fiscal years 2001 and
2000, 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 $1.3 million or 27% of total sales in fiscal year
2001. Export sales to foreign customers amounted to $664,000 or 23% of sales in
fiscal year 2000. The Company's three largest customers accounted for 27%, 12%
and 12% of the Company's sales for the fiscal year ended October 28, 2001. Its
three largest customers accounted for 28%, 23% and 18% of the Company's sales
for the fiscal year ended October 29, 2000.


                                      F-8
<PAGE>

                    DATAMETRICS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

INVENTORIES

      Inventories, which primarily include purchased parts and subassemblies,
are stated at the lower or cost (first-in, first-out) or market. Contract
inventory costs include purchased materials, direct labor and manufacturing
overhead.

PROPERTY AND EQUIPMENT

     Depreciation 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

USE OF ESTIMATES

      The preparation of financial statements in accordance with generally
accepted accounting principles requires the Company's management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities, at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

LOSS PER SHARE

      Net loss per share of common stock is computed based upon the weighted
average number of common shares and share equivalents outstanding during the
year. Stock options and warrants, and preferred stock are not included as share
equivalents since their inclusion would be antidilutive.


                                      F-9
<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. Because of the uncertainty that tax benefits from net
operating losses will be utilized, no deferred tax benefits are included in
income.

RECENT ACCOUNTING STANDARDS

      The Company follows the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," in
accounting for its options and warrants, which permits entities to recognize as
expense over the vesting period the fair value of all stock-based awards on the
date of grant. Alternatively, SFAS No. 123 also allows entities to continue to
apply the provisions of APB Opinion No. 25 "Accounting for Stock Issued to
Employees," and provide pro forma net income and pro forma earnings per share
disclosures for employee stock options grants as if the fair-value-based method
defined in SFAS No. 123 had been applied. The Company has elected to continue to
apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure
provisions of SFAS No. 123.


                                      F-10
<PAGE>

                    DATAMETRICS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      In July 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No.'s 141 and 142, "Business Combinations" and "Goodwill and Other
Intangibles". FASB 141 requires all business combinations initiated after June
30, 2001 to be accounted for using the purchase method. Under FASB 142, goodwill
is no longer subject to amortization over its estimated useful life. Rather,
goodwill is subject to at least an annual assessment for impairment applying a
fair value based test. Additionally, an acquired intangible asset should be
separately recognized if the benefit of the intangible asset is obtained through
contractual or other legal rights, or if the intangible asset can be sold,
transferred, licensed, rented, or exchanged, regardless of the acquirer's intent
to do so. The Company is in the process of determining the impact of these
pronouncements on its financial position and results of operations.

      In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" and SFAS No. 144 "Accounting for the impairment or
Disposal of Long-Lived Assets". SFAS 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated retirement costs. SFAS establishes a single accounting
model, based on the framework established in SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
for long-lived assets to be disposed of by sale. This standard eliminates the
requirement of Statement 121 to allocated goodwill to long-lived assets to be
tested for impairment and discusses other implementation issues.

      Management does not believe these recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.

NOTE 2.  GOING CONCERN

      The Company incurred a net loss of $5,361,000 and $7,897,000 for the years
ended October 28, 2001 and October 29, 2000, respectively. Working capital and
stockholder's equity have been significantly reduced. These factors raise
substantial doubt about the Company's ability to continue as a going concern.

      Management plans to take steps necessary to continue as a going concern.
As noted in Subsequent Events, the Company has acquired a competitor in the
industry, has relocated it to its Orlando, Florida facility and is
reconstructing a marketing team to compete in the industry. The new team has
already attracted attention in the defense industry. In addition to this move,
subsequent to year end, the Company sold part of its technology and much of its
inventory to 3-M Corporation. The proceeds from this transaction, $1.9 million,
are required to meet the working capital needs of the Company until orders are
realized from the new marketing effort.

      The Company's continuation as a going concern is dependent on its ability
to successfully implement its marketing efforts. The accompanying financial
statements do not include any adjustments that may result from the Company's
inability to continue as a going concern.


                                      F-11
<PAGE>

                     DATAMETRICS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 3.  CONTINUATION OF MILITARY BUSINESS

      After several management changes during the past two years, the Company
hired Daniel Bertram as its CEO. As a result of studying the industry and
opportunities available to DataMetrics considering its long-standing position as
a leader in the Ruggedized Printer market, he has embarked upon a plan to
aggressively pursue existing published requirements in the military ruggedized
printer market. Since the investments in some other commercial products were not
consistent with this vision, it was determined that one subsidiary, MadeMyWay,
would be written off so that the Company could focus upon its main mission as
described above. Because these entities ceased operations early in the year,
there were no significant losses to report from discontinued operations.

Note 4.  INVENTORIES

      Inventories consist of the following:

(in thousands)                                                         FYE  2001

Inventories parts and subassemblies                                     $ 1,815
Work in process                                                             112
Finished goods                                                              242
                                                                        -------
                                                                        $ 2,169
Obsolete inventory                                                        6,012
Reserve for obsolete inventory                                           (6,012)
                                                                        -------
Total inventory                                                         $ 2,169


                                      F-12
<PAGE>

Note 4. Continued

                             DATAMETRICS CORPORATION
                    NOTES TO FINANCIAL STATEMENTS (Continued)

      Inventories consist primarily of materials used by the Company for
existing and anticipated contracts and materials and finished assemblies which
are held to satisfy spare parts requirements of the Company's customers. Those
parts not expected to be sold within one year are classified as a non-current
asset and fully reserved. Under this policy, the Company disposed of as obsolete
$2,388,000 of inventory during the year.

Note 5. SALE AND PLEDGE OF COMMON STOCK

      In 2001, 500,000 shares of common stock were issued to Headwaters Capital
after Headwaters had exercised its warrant at $.1323 per share for a total of
$66,150. Common stock was awarded DMTR in the amount of 14,000,000 shares, as a
result of the debt restructure, effective January 31, 2001, The stock was not
issued until October, 2001.

NOTE 6. INCOME TAXES

The primary components of the Company's net deferred income tax assets are as
follows:

                                                                     2001
                                                                   -------
                                                                (in thousands)

Net operating loss carryforwards                                   $ 19,971
General business credit carryforwards                                   372
Other non-deductible accruals and allowances                          2,426
                                                                   --------
      Total deferred income tax assets                               22,769
Valuation allowance for deferred income tax assets                  (22,769)
                                                                   --------
Net deferred income tax assets                                     $     --
                                                                   ========

      Net operating loss carryforwards of approximately $50 million for federal
income tax purposes will expire at various times between 2010 and 2020.

The provision for income taxes is composed of the following:

                                                          2001            2000
                                                        -------         -------
                                                            (in thousands)
Current:
    Federal                                             $    --         $    --
    State                                                    --              --
Deferred:
    Federal                                              (2,611)         (2,081)
    State                                                  (461)           (367)
Increase in valuation allowance                           3,072           2,448
                                                        -------         -------
Net                                                     $    --         $    --
                                                        =======         =======

      Based upon management's judgment and the 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:


                                      F-13
<PAGE>

                    DATAMETRICS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                                               2001       2000
                                                             -------    -------
                                                                (in thousands)

Federal income tax benefit, computed at statutory rate        (1,840)    (2,148)
State income tax benefit, net of federal benefits               (314)      (379)
Non-taxable life insurance proceeds                             (416)        --
Change in valuation allowance                                  3,072      2,448
Other, net
                                                                 502         79
                                                             -------    -------
                                                             $    --    $    --
                                                             =======    =======

NOTE 7. NOTE PAYABLE

      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.

2002                                                                        $ 26
2003                                                                          29
2004                                                                          32
2005                                                                          35
2006                                                                          39
Thereafter                                                                   735
                                                                            ----
   Total Maturities                                                          896

Less: Current maturities of long-term debt                                    26
                                                                            ----
                                                                            $870


                                      F-14
<PAGE>

                    DATAMETRICS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 8. LONG-TERM DEBT

Long-term debt consists of the following:                            2001
                                                                     ----
                                                                 (in thousands)
Subordinated notes(a)                                              $ 3,524
Subordinated convertible notes(b)                                    2,835
DMTR, LLC loan(c)                                                    2,900
Senior priority notes(d)                                             1,025

     Total long-term debt                                          $10,284


                                      F-15
<PAGE>

                    DATAMETRICS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(a)   In December 1998, the Company closed a private placement of approximately
      $3.45 million of 10% Subordinated Notes due in December 2000 (the "10%
      Notes") and $1.55 million in shares of the Company's common stock. The 10%
      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 the new 10% Notes.
      In addition, holders of $500,000 of the Company's Senior Subordinated
      Debentures also exchanged their Debentures for the new 10% Notes. The net
      proceeds of approximately $2.75 million from the sale of 10% Notes and
      common stock were used for debt retirement and working capital purposes.

(b)   In August 1999, the Company closed a private placement of approximately
      $2.3 million of 12% Notes due in August 2000 (the "12% Notes"). The 12%
      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 12% Notes. The net proceeds of
      approximately $1.55 million from the sale of 12% Notes were used for
      working capital purposes.

(c)   Effective January 31, 2001, DMTR and the Company executed loan documents
      to provide the Company with a line of credit in the maximum amount of
      $798,860 (the "Line of Credit"). Accordingly, the Company (assuming a draw
      of the entire Line of Credit) is obligated to DMTR in the aggregate amount
      of $3,600,000 (comprised of $1,496,140 on the Senior Bank Loan, $1,305,000
      on the Bridge Financings and $798,860 on the Line of Credit) (subject to
      the agreement, described below, to exchange a portion of the Bridge
      Financings for Common Stock of the Company). The Line of Credit has a term
      of two years with interest (payable monthly) at the Base Rate of Citibank,
      N.A. plus 100 basis points and is secured by all assets of the Company, a
      pledge of the Company's stock in MadeMyWay and the assets of MadeMyWay. To
      the extent such assets and stock are pledged to secure the Senior Bank
      Loan and the Bridge Financings, the security for the Line of Credit is
      subject to such prior security interests. The Company is also obligated to
      make mandatory prepayments of the principal of the Line of Credit on a
      monthly basis to the extent the Company has available cash in excess of
      $200,000. Simultaneously with the closing of the Line of Credit, DMTR
      agreed to modify the terms of the Senior Bank Loan and the Bridge
      Financings to conform those terms to the terms of the Line of Credit.
      Therefore, the Senior Bank Loan and the Bridge Financings mature on
      January 31, 2003, accrue interest (payable monthly) at the Base Rate of
      Citibank N.A. plus 100 basis points and are subject to the mandatory
      prepayment provision set forth in the Line of Credit. As additional
      consideration for the financings provided by DMTR, the Company issued a
      Warrant to DMTR to acquire up to 14,000,000 shares of the Common Stock of
      the Company on a fully diluted basis with an exercise price of $.125 per
      share, exercisable through January 31, 2007. DMTR has exchanged
      $700,000 in principal amount of the Bridge Financings for the issuance
      of 14,000,000 shares of the Company's Common Stock (with demand
      registration rights).


                                      F-16
<PAGE>

                    DATAMETRICS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(d)   Senior subordinated convertible Notes, convertible into shares of common
      stock of the Company were offered in a private placement April 19, 2001.
      The Notes are senior secured obligations of the Company and secured by all
      of the Company's assets and senior to that of DMTR, LLC. The maturity date
      is two years after date of issue. All or any portion of the Notes are
      redeemable by the Corporation at any time by payment of the principal
      thereof plus accrued interest. The interest rate of the Notes is 10% per
      annum. The Company shall use the proceeds of this Offering for general
      working capital purposes and strategic acquisitions. The investors will be
      issued warrants to purchase 1,025,000 shares of the Company's common stock
      on a pro rata basis in accordance with the principal amount of the Notes
      purchased, at an exercise price of $0.32/share (subject to adjustment).

NOTE 9. RELATED PARTY TRANSACTIONS AND SUBSEQUENT EVENTS

Subsequent Events

1. Acquisition of Peripheral Equipment Corporation

      On November 19, 2001, the Company, after approval by its Board of
Directors, signed a merger agreement (the "Merger Agreement") with Peripheral
Equipment Corporation, a California corporation ("PEC"). The Merger Agreement
was subject to approval of shareholders of PEC, and PEC will be merged (the
"Merger") into Peripheral Equipment Acquisition Corp., a California corporation
and a direct, wholly owned subsidiary of the Company ("Merger Sub"). Upon
effectiveness of the Merger each share of PEC Common Stock issued and
outstanding immediately prior to the effective time of the Merger and each share
subject to an outstanding option or warrant of PEC (the "PEC Options"), was
converted to the right to receive warrants to purchase Common Stock of the
Company at a price of $.07 per share for a period of ten years. Upon
effectiveness of the Merger, and as a result of the conversion of PEC Common
Stock and PEC Options, PEC stockholders and PEC option and warrant holders shall
own in the aggregate, warrants to purchase up to 30,000,000 shares of Common
Stock of the Company. Such aggregate amount does not give effect to a proposed
one (1) for twenty (20) reverse stock split of Common Stock of the Company.

      Upon effectiveness of the Merger, Merger Sub. changed its name to PEC. In
addition, Messrs. James R. Youngblood, President and CFO of PEC; Danny Moore, VP
and Secretary of PEC; and Richard Regan, VP of PEC has agreed to continue their
employment with PEC. On December 3, 2001, the shareholders of PEC voted to
approve the Merger.

2. License and Asset Sale Agreement with 3M

      On January 11, 2002., the Company executed an asset purchase and
intellectual property license agreement for its Condor(TM) Harrier(TM) and
IPS3300(TM) thermal transfer printing technology with 3M. 3M's applications will
include a range of vehicle registration and identification products, such as its
digital license plate manufacturing system. Under the agreement, the Company
granted 3M an exclusive license for certain patents and trade-secrets as applied
to vehicle registration and identification and a non-exclusive license for such
patents and know how for other applications. The Company also sold certain
equipment and other assets to 3M in connection with such use of the intellectual
property. 3M agreed to pay the Company $1,900,000 in consideration for the grant
of the license and sale of the assets.

3. Purchase of Subordinated Notes from QuilCap Corp.

      On December 7, 2001, the Company executed a letter agreement with QuilCap
Corp. ("QuilCap") whereby QuilCap sold certain Subordinated Promissory Notes
(the "Notes") held by three investment funds controlled by QuilCap for an
aggregate purchase price of $319,184 (the "Purchase Price"). The Purchase Price
of the Notes represented an 85% discount of the $2,127,896 aggregate principal
amount of the Notes, which were originally purchased by QuilCap in 1998. As
additional consideration for the purchase of the Notes, the Company issued the
three funds warrants to purchase an aggregate of 5,500,000 shares of the
Company's Common Stock at a price of $.06 per share. The Notes were purchased by
certain employees of the Company with funds advanced by the Company.

4. Issuance of Options to Officers and Directors

      On February 28, 2002, the Company awarded options to purchase shares of
common stock to Messrs. Bertram, Galloway, Herman and Friedenberg. The options
are exercisable following the effectiveness of the Company's one-for-20 reverse
stock split for a period of 5 years at an exercise price equal to 50% of the
average closing bid price per share of common stock for the first 30 trading
days after the effectiveness of the reverse split. Messrs. Bertram and Galloway
each received options for 2,041,365 shares of common stock on a post split basis
as management incentive options. Messrs. Herman and Friedenberg received options
for 765,512 and 255,171 shares respectively on a post split basis in
consideration for their work in the restructuring of the Company's capital
structure in 2001 and 2002.


                                      F-17
<PAGE>

Note 10. LEASES

      The Company currently leases various equipment under operating leases that
expire through 2004. Minimum future rental commitments under noncancelable
operating are as follows:

2002                                                                $162,000
2003                                                                  52,000
                                                                    --------
                                                                    $214,000

      Rental expenses charged to operations were $171,000, and $315,000 for the
fiscal years 2001 and 2000, respectively.

Note 11. STOCK OPTION PLAN AND WARRANTS

(a) 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 six 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:

                                                  Number of       Exercise Price
                                                    Shares             Range
                                                  ---------       --------------
                                                       (in thousands)
Options outstanding for
      Shares of common stock at

      October 31, 1999                                  191       $1.2500-7.8750
      Granted                                           750       $0.6200-1.0000
      Cancelled or expired                             (155)      $1.2500-7.8750
      Exercised                                          --                   --

Options outstanding for shares of
      common stock at October 29, 2000                  786
      Granted                                         3,000                $0.05
      Cancelled or expired                               (5)               $1.50
      Exercised                                          --                   --
Options outstanding for shares of
      common stock at October 28, 2001                3,781       $0.050-1.815

Shares reserved for issuance at
      October 28, 2001                                1,786

Weighted average option exercise price information was as follows:

                                                       2001                 2000
                                                      -----                -----
Outstanding at beginning of year                      $1.26                 1.99
      Granted during the year                          0.05                $0.75
      Exercised during the year                          --                   --
      Canceled, terminated and expired                    0                 2.25
      Exercisable at year end                         $0.31                $1.26


                                      F-18
<PAGE>

      Significant option groups outstanding at October 28, 2001 and related
weighted average price and life information were as follows:

<TABLE>
<CAPTION>
                                    Weighted
                                    Average        Weighted                    Weighted
                                    Remaining      Average    Number           Average
Exercise Price  Number Outstanding  Constractual   Exercise   Exercisable      Exercise
Range           (in thousands)      Life           Price      (in thousands)   Price
--------------  ------------------  ------------   --------   --------------   --------
<C>                    <C>                  <C>    <C>                   <C>   <C>
$1.8150                31                   1.51   $1.8150               31    $1.8150
$0.0062               500                      4   $0.6200              125    $0.0062
$0.1000               250                      4   $0.1000               63    $0.1000
$0.0500              3000                   4.66   $0.0500             3000    $0.0500
-------          --------               --------   -------         --------    -------

                     3781                    3.7   $0.1500             3207    $0.0700
</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.

      FASB Statement 123, "Accounting for Stock-Based Compensation," requires
that the company provide pro forma information regarding net loss and loss per
share as if the compensation cost for the Company's stock option plan had been
determined in accordance with the fair value method prescribed in such
statement. The Company estimates the fair value of each stock option at the
grant date by using the Black-Scholes option-pricing model with the following
weighted average assumptions used for grants in fiscal 2000: dividend yield of
0%; expected volatility of 45.8%; average risk-free interest rate of 5.95%;
expected life of 5 years; and a discount due to marketability and dilution of
0%. For fiscal 2001, the weighted average assumptions used for grants were:
dividend yield of 0%; expected volatility of 160.2%; average risk-free interest
rate of 4.81%; expected life of 5 years; and a discount due to marketability and
dilution of .869.


                                      F-19
<PAGE>

      Under the accounting provisions of FASB Statement 123, the Company's net
loss and loss per share would have been adjusted to the pro forma amounts
indicated below:

                                           (in thousands, except per share data)

                                                    2001            2000
                                                 ---------       ---------

Net loss

    As reported                                     $5,361          $7,897
    -----------                                     ------          ------
    Pro forma                                       $5,481          $7,912
Net loss
   (basic and diluted)
    As reported                                     ($0.24)         ($0.41)
    Pro forma                                       ($0.24)         ($0.41)

(b) WARRANTS

      On January 31, 2001, DMTR, in exchange for providing financing to
DataMetrics for its ongoing operations, was granted warrants for 7,000,000
shares of Common Stock of DataMetrics Corporation. The exercise price per share
under the Warrant is $.125. The warrant will be exercisable through January 31,
2007.

      A schedule of Warrants Outstanding at October 28, 2001 is as follows:

                                 Grant      Expiration         #          Strike
Description                      Date         Date          Options        Price
-----------                      ----         ----          -------        -----
Gilston Corp                    05/07/99     05/07/04      1,575,000       1.350
Quilcap                         11/25/98     11/25/03        150,000       1.375
Friedenberg                     03/01/99     03/01/04         75,000       1.750
(Expired)                       05/04/99     05/04/01        100,000       2.000
(Expired)                       05/04/99     05/04/01        100,000       4.000

10% Bridge Note                 03/10/99     03/10/04        125,000       1.000
                                03/16/99     03/10/04         75,000       1.000

10% Subord. Notes               12/24/98     12/24/03      2,035,560       1.500
                                12/28/98     12/24/03         40,000       1.500

12% Subord. Debt                08/02/99     08/02/04      1,300,000       1.100

1.5 Million Line of Credit      08/25/99     08/31/04      1,500,000       1.000
                                08/25/99     08/31/04         75,000       1.100

DMTR                            01/31/01     01/30/07      7,000,000       0.125
                                                          ----------

Total 10/28/00                                            14,150,560

Expired FYE 10/28/01                                        -200,000
                                                          ----------

Total 10/28/01                                            13,950,560
                                                          ==========


                                      F-20
<PAGE>

NOTE 12. COMMITMENTS AND CONTINGENCIES

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.


                                      F-21
<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. 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. Under the terms of
the Agreement, the additional shares required to be issued is approximately 2.7
million shares, which shares have not been issued as of October 28, 2001.


                                      F-22
<PAGE>

                    DATAMETRICS CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 13. SEGMENT DATA

      The Company wrote off its investments in the company comprising its
internet segment. Thus, there is no data to report. The Company operates and
reports to management as a single segment.

Note 14. Extraordinary Income

      Extraordinary income of $1,046,000 was recognized in FYE 2001. This was a
result of the proceeds received from the cash surrender value of a life
insurance policy on the life of a former Chairman of the Board of DataMetrics.

Note 15. Loss on Discontinued Operations

      During FYE 2001, the investment in a subsidiary of DataMetrics was written
off in the amount of $194,000. Management decided to terminate this segment of
the business.



                                      F-23