SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                                   FORM 10-KSB

                                   (Mark One)

               [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the Fiscal Year Ended October 31, 2004

    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                        (IRS 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         None - quoted on the Pink Sheets, Over the
                                                               Counter

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 [] No [X]

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

<PAGE>

Transitional Small Business Disclosure Format (Check one): Yes_____; No__X__

State Issuer's revenues for its most recent fiscal year:
                                                        Gross Sales - $4,443,078


State the number of shares outstanding of the Registrant's Common Stock ("Common
Stock"), as of the latest practicable date: 32,113,103 shares of Common Stock as
of February 11, 2006.

The aggregate market value of the common equity of the company held by
non-affiliates as of February 11, 2006 was $1,016,232.


                                       2
<PAGE>

PART I

ITEM 1.  BUSINESS - General

      This report contains certain statements of a forward-looking nature that
relate to the 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 the 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, monitors and peripherals, which are designed to work in harsh
environments. The U.S. Military, major defense prime contractors, international
military forces and commercial markets principally use the Company's products.

      The Company has been in a multi-year transformation to refocus on its core
competencies, servicing the military/defense sector. The tragic events of
September 11, 2001 and subsequent military events, including the Global War on
Terrorism, Operation Enduring Freedom and Operation Iraqi Freedom, have had a
significant effect on the Company's business. The war effort caused an immediate
reallocation of military/ defense resources to short term military needs such as
troop support and deployment as well as munitions. Many programs that the
Company relied on were delayed or canceled. Prior to September 11, 2001, this
entire segment had been impacted in recent years by reduced government spending
and defense appropriations. The militarized product area had been especially
subject to defense budget cuts. The long design cycle for these programs creates
an intangible cost in the form of rapid technological obsolescence. Some
military programs that would have sought militarized equipment some years ago
have modified the requirements to reflect a need for rugged or commercial
products. This trend has tended to benefit sales of the Company's rugged product
line. As the Army has pushed for further digitization of the battlefield, the
Company has pressed forward its initiatives in the tactical and tactical support
areas.

      Many of the military programs from which the Company anticipates
generating its revenue have been rescheduled and military priorities have been
reconsidered to account for short, medium, and long-term needs. Although the
defense budget has been significantly increased, and Homeland Security has taken
on a new meaning at the federal, state, and municipal levels, the Company has
concerns about the continued war on terrorism, the conflict in Iraq and a
continuous US military presence in the region. This activity could divert
government funds for troop support and battlefield initiatives.

      The Company designs, develops, and manufactures computers and computer
peripheral equipment for military, industrial and commercial applications where
reliable operation of the equipment in challenging environments is imperative.
The systems and equipment are qualified for use in airborne, shipboard, and
ground based applications. The Company's product lines include a broad range of
computers, computer workstations, servers, printers, plotters and monitors.

      The Company offers military specified and ruggedized versions of flat
panel monitors and other peripheral equipment (including computers, printers,
keyboards and trackballs) encased in shock, vibration and temperature resistant
chassis. The chassis produced by the Company are used in conjunction with its
product by the military to house this sensitive ruggedized equipment. The Navy
P3 Orion, Air Force AWACS and Army Fire-Finder programs all require rugged rack
enclosures to protect the equipment from shock, vibration and other damage which
may be experienced in a harsh operating environment. DataMetrics continues to
increase its presence in the military arena including United States Air Force
avionics and ground-based systems as well as United States Army system
diagnostics. DataMetrics' equipment is designed and qualified for use as part of
commercial airlines cockpit systems.


                                       3
<PAGE>

BUSINESS STRATEGY

      Our goal is to continually improve our position as a leading supplier of
ruggedized systems and equipment. Our strategies to achieve our objectives
include:

      o     Leverage Incumbent Relationships. We intend to leverage our
            relationships with government and industry decision-makers by
            continuing to deliver high levels of performance on our existing
            contracts. Our experience has shown that strong performance on
            existing contracts greatly enhances our ability to obtain additional
            business with our existing customer base. To accomplish this, we
            intend to continue to position ourselves as a "best value" provider
            for our customers. "Best value" is a DoD contracting theme which
            focuses supplier selection on a variety of criteria, including
            supplier's past performance, instead of solely on lowest price.

      o     Develop and Expand Existing Technologies. Through a combination of
            customer-funded research and development and our own internal
            research and development efforts, we intend to continue to focus on
            the further development of our products. Customer-funded development
            contracts enable us to work with our customers to design and
            manufacture new systems and components, while decreasing our
            financial risk.

      o     Pursue Strategic Acquisitions. Through selective acquisitions, we
            aim to broaden our existing product base, build on our existing
            customer relationships and enhance our ability to enter new markets.

      The Company primarily uses a direct sales approach in the US with several
independent representatives in key areas. Internationally, the Company uses
manufacturers' representatives in key areas of Europe, Latin America and the Far
East.

      In December 2001, the Company acquired Peripheral Equipment Corporation
(PEC) as a wholly owned subsidiary. The Company sought to gain certain market
synergies with PEC to strengthen the Company's performance and product
offerings, specifically in the area of LCD Flat Screen Monitors and VME
enclosures. The Company combined operations with PEC under the Datametrics name.
PEC is now inactive and no longer operates as a separate entity.

      In January 2002, the Company signed an exclusive licensing agreement with
3M of Minneapolis, MN for its Vizzix System's Condor(R) thermal printing
technology. The agreement included the sale of assets and provided an exclusive
right for 3M to market the proprietary technology into the registered motor
vehicle license plate industry worldwide.

      In 2002, the Company initiated a strategic corporate initiative to offer
integration services such as `populated' chassis and all-in-one workstations in
addition to our traditional products. The Company is currently executing on a
$1.6MM product integration contract with Raytheon Company with significant
follow-on potential predicated on the US Navy's schedule for upgrading P-3
Orions, and Raytheon's ability to attract new customers.


                                       4
<PAGE>

      Despite limited resources, the Company has also been able to invest
modestly in research and development (R & D). The customers absorb most of the
Company's R & D and Non-Recurring Expenses (NRE). However, over the past few
years, the company has invested funds to develop new products and updates to
existing products which include: The Tuff-Rider - a ruggedized computer, a
low-cost ink-jet printer, a new color thermal printer to replace its 1901/1903
models and a new trunk-mounted rugged PC for the Public Safety market.

      The Company's Commercial Airline Products have been sought out by airframe
manufacturers to provide a new generation of products. As one of three main
manufacturers of FAA certified printers in the world, the Company seeks to
garner a greater market share. However, the Company will need to invest to
expand its product offering and provide technology updates to its current
product offering.

COMPETITION

      The primary business of the company is the design and manufacture of
application-specific products for military/defense applications and programs. As
such, the company is often a sole-sourced provider of goods and services. The
focus of the company is focused more on collaborating with its customers for
products that meet applications rather than marketing specific products. As
such, the company's success is much more dependant on its collaborative efforts
with its customers than bidding against competitors. Overall, when in
competitive situations, because of the breadth of The Company's product line,
the Company competes with different companies for various products. For its
chassis' the Company competes with ELMA, AP Labs and Carlo Gavazzi. The Company
competes with Barco for monitors and with Miltope for printers.

      The Company's competitive position in its industry segments have been
based upon the experience of its technical personnel in their respective
specialized fields of Rugged computer and peripheral product design; its broad
range of products; its ability to design and manufacture its products to meet
customers' specifications; its specialized manufacturing and testing facilities;
its long association with many of its customers and its managerial and marketing
expertise in dealing with commercial customers, prime Military/Defense
contractors and the DoD. The Company believes that once a particular supplier's
computer and/or peripheral products have been selected for incorporation in a
military or commercial program, further competition by other vendors during the
life cycle of that program is limited.


The extent of competition for any single project generally varies according to
the complexity of the product and the dollar value of the anticipated award. We
believe that we compete on the basis of:

      o     Accumulated technical knowledge and expertise;

      o     The performance, flexibility, and price of our products;

      o     Reputation for prompt and responsive contract performance; and

      o     Breadth of our product lines.


      Our future success will depend in large part upon our ability to leverage
business within our existing customer base, establish new customers, and
identify new program opportunities early enough to be in on the "ground floor".


                                       5
<PAGE>

SOURCES OF SUPPLY

      The Company is generally not dependent upon any one supplier for any raw
material or component we purchase. There are available alternative sources for
such raw materials and components.

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
utilize 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 long as a ten-year period, the Company's share of the budget for any
major program is relatively small, generally 1-10%, depending on the scope.

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.

      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, and other
proprietary know-how have significant value, changing technology and COTS
(Commercial off-the-shelf) initiatives within the DoD, makes the Company's
future success dependent principally upon its employees' technical competence
and creative skills for continuing innovation.

      The Company's business is subject to various statutes, regulations and
provisions governing defense contracts including the Truth in Negotiations Act,
which provides for the examination by the U.S. government of cost records to
determine whether accurate pricing information was disclosed in connection with
government contracts.

      Contracts with the U.S. government as well as with U.S. government prime
contractors are typically at a fixed price with a delivery cycle of 3 to 12
months, with contracts under any particular program being subject to further
funding and negotiation. The Company's defense contracts contain customary
provisions permitting termination at any time at the convenience of the customer
and providing for payment for work-in-progress should the contract be canceled.

      In Fiscal 2004, the Company's largest customers were the U.S. Government,
Lockheed Martin Corp., Northrop Grumman Corp., and Raytheon Company. The loss of
any one of these customers could have a material adverse impact on the Company's
operations and financial condition. The Company believes that it has a good
reputation with its customers for quality and delivery of its products and
services.


                                       6
<PAGE>

      Companies that are engaged primarily in supplying equipment and services,
directly or indirectly, to the U.S. government are subject to special risks
including dependence on government appropriations, termination without cause,
contract re-negotiation and competition for the available DoD business.

      The Company believes that it will benefit from a trend of increasing DoD
budget forecasts and spending. The Company's DoD related contracts provide the
DoD 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.

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 31, 2003 and October 31, 2004 was approximately $3,360,374 and
$1,727,367 respectively. The entire backlog at October 31, 2003 was realized
during the fiscal year ending October 31, 2004.


MARKETING

      DataMetrics has an in-house marketing group that is comprised of
experienced technical professionals who are familiar with the government
agencies and companies that comprise our target markets. DataMetrics also uses
independent manufacturer sales representatives where it is deemed applicable and
cost effective, both domestically and abroad.

ENVIRONMENTAL EXPOSURE

      DataMetrics is an environmentally responsible member of the community. The
Company uses no hazardous materials in its products or 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.


                                       7
<PAGE>

EMPLOYEES

      The Company employed 36 persons on a full-time basis as of October 31,
2004, compared to 37 persons on a full-time basis as of October 31, 2003. A
union does not represent any of the Company's employees nor is the Company
subject to a collective bargaining agreement. The Company considers relations
with its employees to be good.

OTHER MATTERS

      The business of the Company is not subject to seasonal fluctuations.

      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.

      In 2000, the Company was recognized for its quality initiatives, and was
awarded ISO 9002 compliance certificate for all the Company's facilities by the
Defense Contract Management Agency.

INTERNET ADDRESS

      The Company maintains a website where additional information concerning
its business and various upcoming events can be found. The address of the
Company's website is www.datametrics.com.


RECENT DEVELOPMENTS

On December 30, 2005, the Company converted certain debt and all of its
outstanding shares of Series A Cumulative Convertible Redeemable Preferred Stock
(the "Series A Preferred Stock" into Common Stock of the Company (the
"Restructuring") as follows:

      (a)   Pursuant to a Loan Termination and Conversion Agreement between the
            Company and DMTR, LLC ("DMTR"), DMTR agreed to convert debt owed to
            DMTR by the Company (which debt consisted of an aggregate principal
            amount of $2,900,000 and accrued, but unpaid interest on the unpaid
            principal amount ) (the "DMTR Loan") into 244,736,145 shares of
            common stock of the Company. DMTR also agreed to terminate its
            security interest in the Company's assets that it held as security
            for the DMTR loan. The 244,736,145 shares do not give effect to a
            proposed one (1) for thirty (30) reverse stock-split which the
            Company intends to consummate in February 2006 as described below
            (the "Reverse Stock Split").

      (b)   The Company and the holders of the Company's issued and outstanding
            892,652 shares of Series A Preferred Stock, representing all of the
            issued and outstanding shares of Series A Preferred Stock of the
            Company, converted such shares into 48,927,229 shares of common
            stock of the Company, before giving effect to the Reverse Stock
            Split.

      In connection with the Restructuring, on December 30, 2005 the Company
entered into a Series B Preferred Stock and Warrant Purchase Agreement (the
"Purchase Agreement") with SG DMTI Capital LLC ("SG"), pursuant to which SG
purchased 500,000 shares of the Company's Series B Preferred Stock and has the
right to purchase an additional 500,000 shares of Series B Preferred Stock at a
price of $1.00 per share. Pursuant to the Purchase Agreement, on December 30,
2005, the Company issued SG 500,000 shares of Series B Preferred Stock in
exchange for the cancellation of an aggregate of $499,563 in principal and $467
in accrued interest on certain promissory notes (the "Notes") issued by the
Company and held by SG. The obligation of SG to purchase additional shares of
Series B Preferred Stock is contingent upon the satisfaction of certain
conditions, including:


                                       8
<PAGE>

      (a) the Company shall be current and shall have timely filed with the SEC
      reports, schedules, registration statements and definitive proxy
      statements that the Company is required to file with the SEC; and

      (b) the Company shall have been in compliance with a budget in accordance
      with the Purchase Agreement for at least 6 months;

      Upon satisfaction of the aforementioned conditions, the Company will have
the right to request SG to purchase an additional 125,000 shares of Series B
Preferred Stock for $125,000 for each quarter in which the Company's quarterly
revenues for the fiscal quarter immediately preceding it are of at least
$1,500,000, and/or the Company's average quarterly revenues for the two fiscal
quarters immediately preceding it are of at least $1,500,000. In the event that
the Company should not meet the $1,500,000 threshold in any fiscal quarter, but
the average quarterly revenues of this quarter and the fiscal quarter
immediately following it are of at least $1,500,000, then the Company will have
the right to request SG to purchase an additional 250,000 shares of Series B
Preferred Stock for $250,000.

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. The Company consolidated all of its operations to this location
in 2001. The Company had a mortgage with SouthTrust Bank with an outstanding
balance of $779,782 as of October 31, 2004. The property is adequately insured.

      In July 2005, the company was presented with a proposal from SG DMTI, LLC
("SGD"), an affiliated entity of two members of DMTR, LLC., who are also
principal shareholders of the Company.

      Pursuant to the proposal, SGD acquired the Company's real property in
Orlando for $1,500,000 effective November 1, 2005. SGD and the Company entered
into a five-year triple net lease with an annual rent obligation of
approximately $150,000.

ITEM 3. LEGAL PROCEEDINGS.

      The Company is, from time to time, the subject of litigation, claims and
assessments arising out of matters occurring during the normal operation of the
Company's business. In the opinion of management, the liability, if any, under
such current litigation, claims and assessments would not materially affect the
financial position or the results of the operations of the Company except as
disclosed herein.

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

      None


                                       9
<PAGE>

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 "DMTI"). In March 2003, the Company's
stock became quoted on the Pink Sheets. The Company anticipates re-listing its
stock on the Over-the-Counter Bulletin Board as soon as it files all periodic
reports with the SEC as required by the Securities Exchange Act of 1934.

      The closing numbers for each quarter were obtained from the Bloomberg
System. The prices presented are bid prices which represent prices between
broker-dealer and do not include retail markups and markdowns or any commission
to the dealer. The prices may not reflect actual transactions.

The high and low sales for the Common Stock are set forth in the following
table.

<TABLE>
<CAPTION>
Fiscal 2005                                                                      High                    Low
<S>                                                                             <C>                     <C>
October 31           ..................................                         $0.025                  $0.021

July 31              ..................................                         $0.025                  $0.021

April 30             ..................................                         $0.045                  $0.021

January 31           ..................................                          $0.080                 $0.030


Fiscal 2004                                                                      High                    Low

October 31           ..................................                         $0.060                  $0.035

July 31              ..................................                         $0.055                  $0.030

April 30             ..................................                         $0.140                  $0.045

January 31           ..................................                          $0.090                 $0.020


Fiscal 2003                                                                      High                    Low

October 31           ..................................                         $0.150                  $0.014

July 31              ..................................                         $0.030                  $0.013

April 30             ..................................                         $0.170                  $0.010

January 31           ..................................                          $0.160                 $0.040
</TABLE>


                                       10
<PAGE>

<TABLE>
<CAPTION>
Fiscal 2002                                                                      High                    Low
<S>                                                                              <C>                    <C>
October 31           ..................................                          $0.41                  $0.070

July 31              ..................................                          $1.31                  $0.200

April 30             ..................................                          $2.20                   $0.70

January 31           ..................................                          $1.80                   $0.70
</TABLE>

      There were approximately 720 stockholders of record as of December 10,
2005. 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.


                                       11
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

      The financial and business analysis below provides information that the
Company believes is relevant to an assessment and understanding of the Company's
consolidated financial condition, changes in financial condition, and results of
operations. This financial and business analysis should be read in conjunction
with the consolidated financial statements and related notes.

      Certain matters and statements made in this Annual Report on Form 10-KSB
constitute forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934. All such statements are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Wherever possible, the Company has identified these forward-looking statements
by words such as "anticipates," "may," "believes," "estimates," "projects,"
"expects" "intends," and words of similar import. In addition to the statements
included in this Annual Report on Form 10-KSB, the Company and its
representatives may from time to time make other oral or written forward-looking
statements. All forward-looking statements involve certain assumptions, risks
and uncertainties that could cause actual results to differ materially from
those included in or contemplated by the statements. These assumptions, risks,
and uncertainties include, but are not limited to, general business conditions,
including the timing or extent of any recovery of the economy, the highly
competitive nature of the industry in which the Company operates, the continued
involvement of military forces in the war on terrorism, the speed with which
consumers regain confidence in the safety of air transportation and other risks
and uncertainties. All such forward-looking statements may be affected by
inaccurate assumptions or by known or unknown risks and uncertainties, and
therefore, those statements may turn out to be incorrect. Consequently, no
forward-looking statement can be guaranteed. Actual future results may vary
materially.

      All forward-looking statements are made as of the date of filing or
publication. We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or otherwise.
Investors are advised, however, to consult any further disclosures the Company
makes in future filings with the Securities and Exchange Commission or in any of
its press releases. 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.


                                       12
<PAGE>

RESULTS OF OPERATIONS

      Fiscal Year 2004 Compared With Fiscal Year 2003.

      Sales for the year ended October 31, 2004 were $4,443,000 an increase of
$963,000 or 28% compared with sales of $3,480,000 in the prior fiscal year. The
increase in sales for the year is primarily attributable to the Company
refocusing its efforts on regaining market share of its core business -
ruggedized equipment for military applications.

      Cost of sales for the year ended October 31, 2004 was $3,323,000 (75% of
sales); an increase of $763,000 or 30% compared with $2,560,000 (74% of sales)
for the prior fiscal year. The increase in Cost of sales is due to a
corresponding increase in Sales.

      Selling, General and Administrative (SG&A) expenses for the year ended
October 31, 2004, were $1,371,000 (31% of sales) a decrease of $516,000 or 27%,
compared with $1,887,000 (54% of sales) for the same period in the prior fiscal
year. Significant decreases in insurance costs, and professional fees
contributed to the reduction.

      Net interest expense was $470,000 for the year ended October 31, 2004
compared with net interest expense of $435,000 for the prior year. Even though
long-term debt is lower in 2004 than 2003, interest expense increased. In 2003,
the Company was negotiating debt relief with holders of the debt. During that
time, the debt holders agreed to forgive interest expense earned during the
period of negotiation. Interest charges resumed under the stated terms of the
debt later in 2003. Additionally, 2004 interest expenses reflect the effects of
amortization of refinancing costs incurred late in 2003.

      The net loss for the year ended October 31, 2004 amounted to $623,000 an
improvement of $1,382,000 or 69% compared with a loss of $2,005,000 for the
prior fiscal year. The reduced loss for the current period is attributable to
significantly smaller write-downs, cost reduction measures, and lower costs
associated with G&A. The reversal and reentry into the Defense market has been
difficult as the typical sales cycle for a military program is 18-24 months.
DataMetrics currently has a sales and marketing team comprising experienced
technical professionals dedicated to the task of developing 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 31, 2004. 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.


                                       13
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

      The Company's principal capital requirements have been to fund working
capital and the payment of long-term debt. The Company has relied primarily on
internally generated funds, private placement proceeds, and subordinated debt to
finance its operations.

      Net cash used in operations was $816,000 in 2004 and $405,000 was used in
2003. The change from 2003 to 2004 was due to ongoing losses and reentry into
the military market.

      Net cash used in investing activities was $0 in 2004 and 2003,
respectively.

      Net cash provided by financing activities were $796,000 and $418,000 in
2004 and 2003, respectively. The change from 2003 to 2004 was primarily related
to the issuance of preferred stock in fiscal year 2004.

      The Company continues to have substantial debt that was due in 2003 and
2004. Although the Company has generated much of the cash flow through equity
transactions to sustain current operations, the debt obligations of previous
periods have not been met. As a result, additional capital and a significant
restructuring will be required to meet its prior period debt obligations.

      Effective January 31, 2001, DMTR LLC ("DMTR")(an entity whose managing
member is Bruce Galloway, the Company's Ex Chairman) provided the Company with a
line of credit in the maximum amount of $798,860 (the "Line of Credit").
Accordingly, the Company was initially 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 financing assigned to DMTR and $798,860 on the Line of Credit). These
obligations are secured by all of the assets of the Company. In April 2001, DMTR
agreed to forgive $700,000 of principal obligations in exchange for the issuance
of 14,000,000 shares of common stock or 700,000 shares on a post reverse stock
split. On January 31, 2003, the obligations in the principal amount of $2.9
million plus accrued interest matured. As additional consideration for the
financing 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, to be exercised through January 31, 2007. The
exercise price was subsequently lowered to $.075 per share.

      The Company was unable to repay its obligations due on January 31, 2003
and is in default on its obligations to DMTR. The Company and DMTR entered into
a Standstill Agreement, which provides for DMTR not to exercise any of its
default rights through January 2005, so long as the parties negotiate in good
faith to restructure this obligation. There can be no assurance that DMTR will
not seek to enforce its remedies with respect to the obligations owed by the
Company. The agreement further provides that DMTR, in its sole discretion and at
any time after January 31, 2005, may terminate the Standstill Agreement if it
determines that the Company is no longer negotiating in good faith. The
standstill agreement has expired but the parties are continuing to negotiate to
restructure this obligation in conjunction with the proposed financing from SG
DMTI. There is no assurance such restructuring or additional financing will be
consummated or that it will be sufficient to ensure that the Company can satisfy
its operating expenses. Since December, 2002, the Company has received proceeds,
either in the form of cash or in lieu of other obligations such as interest
payments, the total of said proceeds amounts to $727,000 from the exercising of
warrants at the exercise price of $.055 per share [and $.075 per share] from
various members of DMTR.


                                       14
<PAGE>

      In December 2003 through July 2004 various investors purchased an
aggregate of $892,656 of the Company's Preferred Series A Stock. The stock has a
cumulative dividend of four percent per annum and is convertible into shares of
the Company's common stock at $.06 per share. The consideration for such stock
consisted of $862,656 in cash and $30,000 in services. The proceeds of the
offering were used for working capital.

      In July 2005, the company was presented with a proposal from SG DMTI, LLC
("SGD"), an affiliated entity of two members of DMTR, LLC., who are also
principal shareholders of the Company.

      In July 2005, an affiliate of SGD acquired the Company's outstanding
mortgage with SouthTrust (now Wachovia) Bank. In July and August 2005, SGD
loaned the Company an aggregate of $410,000, which the Company has used to repay
taxes owed on its real estate and for working capital.

      Pursuant to the proposal, SGD acquired the Company's real property in
Orlando for $1,500,000 effective November 1, 2005. SGD and the Company entered
into a five-year triple net lease with an annual rent obligation of
approximately $150,000. On November 8, 2005, SGD also loaned the Company
$200,000 pursuant to a promissory note secured by all the Company's assets and
due on December 7, 2005 (the "Bridge Note").

      On December 30, 2005, the Company converted certain debt and all of its
outstanding shares of Series A Cumulative Convertible Redeemable Preferred Stock
(the "Series A Preferred Stock" into Common Stock of the Company (the
"Restructuring") as follows:

      (c)   Pursuant to a Loan Termination and Conversion Agreement between the
            Company and DMTR, LLC ("DMTR"), DMTR agreed to convert debt owed to
            DMTR by the Company (which debt consisted of an aggregate principal
            amount of $2,900,000 and accrued, but unpaid interest on the unpaid
            principal amount ) (the "DMTR Loan") into 244,736,145 shares of
            common stock of the Company. DMTR also agreed to terminate its
            security interest in the Company's assets that it held as security
            for the DMTR loan. The 244,736,145 shares do not give effect to a
            proposed one (1) for thirty (30) reverse stock-split which the
            Company intends to consummate in February 2006 as described below
            (the "Reverse Stock Split").

      (d)   The Company and the holders of the Company's issued and outstanding
            892,652 shares of Series A Preferred Stock, representing all of the
            issued and outstanding shares of Series A Preferred Stock of the
            Company, converted such shares into 48,927,229 shares of common
            stock of the Company, before giving effect to the Reverse Stock
            Split.

      In connection with the Restructuring, on December 30, 2005 the Company
entered into a Series B Preferred Stock and Warrant Purchase Agreement (the
"Purchase Agreement") with SG DMTI Capital LLC ("SG"), pursuant to which SG
purchased 500,000 shares of the Company's Series B Preferred Stock and has the
right to purchase an additional 500,000 shares of Series B Preferred Stock at a
price of $1.00 per share. Pursuant to the Purchase Agreement, on December 30,
2005, the Company issued SG 500,000 shares of Series B Preferred Stock in
exchange for the cancellation of an aggregate of $499,563 in principal and $467
in accrued interest on certain promissory notes (the "Notes") issued by the
Company and held by SG. The obligation of SG to purchase additional shares of
Series B Preferred Stock is contingent upon the satisfaction of certain
conditions, including:


                                       15
<PAGE>

      (a) the Company shall be current and shall have timely filed with the SEC
      reports, schedules, registration statements and definitive proxy
      statements that the Company is required to file with the SEC; and

      (b) the Company shall have been in compliance with a budget in accordance
      with the Purchase Agreement for at least 6 months;

      Upon satisfaction of the aforementioned conditions, the Company will have
the right to request SG to purchase an additional 125,000 shares of Series B
Preferred Stock for $125,000 for each quarter in which the Company's quarterly
revenues for the fiscal quarter immediately preceding it are of at least
$1,500,000, and/or the Company's average quarterly revenues for the two fiscal
quarters immediately preceding it are of at least $1,500,000. In the event that
the Company should not meet the $1,500,000 threshold in any fiscal quarter, but
the average quarterly revenues of this quarter and the fiscal quarter
immediately following it are of at least $1,500,000, then the Company will have
the right to request SG to purchase an additional 250,000 shares of Series B
Preferred Stock for $250,000.

      In addition, the Company and SGD have proposed that SGD loan the Company
an additional $500,000 and purchase $500,000 in Preferred Stock. The parties
anticipate that the amounts under the Bridge Note will be offset against the
additional $500,000 loan. SGD would also have the ability to obtain 50% of the
outstanding equity of the Company through the exercise of a warrant for nominal
additional consideration. The proposal by SGD is currently under negotiation and
there is no assurance that it will be consummated or it may be consummated on
different terms.

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 are discussed at appropriate points
in this report and the Company's other SEC filings. Others are included in the
fact that the Company has been engaged in supplying equipment and services to
the U.S. government defense programs which are subject to special risks,
including dependence on government appropriations, contract termination without
cause, contract re-negotiations and the intense competition for available
defense business.


ITEM 7. FINANCIAL STATEMENTS

      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.


      NONE


                                       16
<PAGE>

ITEM 8A. CONTROLS AND PROCEDURES.

(a) Disclosure Controls and Procedures. Under the supervision and with the
participation of our management, including our principal executive and financial
officer, we have evaluated the effectiveness of the design and operation of our
disclosure controls and procedures (as such term is defined in Rule 13a-15(e) or
Rule 15d-15(e) under the U.S. Securities Exchange Act of 1934, as amended)
within 90 days of the filing date of this quarterly report and, based on their
evaluation, our principal executive and financial officer have concluded that
these controls and procedures are working now and our current period reports
will be filed on time once we have finished filing the backlog of delinquent
reports. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by us in the reports that we file under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms, and that such information
is accumulated and communicated to our management, including our principal
executive and financial officer, as appropriate to allow timely decisions
regarding required disclosure.

      (b) Changes in Internal Control Over Financial Reporting. There were no
significant changes in our internal control over financial reporting identified
in connection with the evaluation required by Exchange Act Rule 13a-15(d) or
Rule 15d-15(d) that occurred during the period covered by this quarterly report,
or to our knowledge in other factors, that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.


ITEM 8B - OTHER INFORMATION

         NONE


                                       17
<PAGE>

PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS

      Management is vested in DataMetrics' Board of Directors and officers. At
each Annual Meeting, shareholders are to elect Directors. Each newly elected
Director holds office until the 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 2004.

      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             47              Director
Daniel Bertram                44              Chief Executive Officer, Director
Gary Herman                   40              Chairman, Director
Rafik Moursalien              48              Controller
Thomas Leonardis              59              Director
Edward Kroning                44              Secretary



BUSINESS EXPERIENCE

      Bruce R. Galloway has been a director of the company since August 2000 and
was Chairman of the Board from August 2000 to May 2005. Mr. Galloway is
currently a managing director of Arcadia Securities Inc., a New York-based
investment firm. From 1993 to 2005 Mr. Galloway was a managing director at
Burnham Securities inc., a New York based investment bank. Prior to joining
Burnham, from 1991 to 1993, Mr. Galloway was a senior vice president at
Oppenheimer & Company, a New York-based investment bank. Mr. Galloway holds a
B.A. degree in Economics from Hobart College and an MBA in Finance from New York
University's Stern Graduate School of Business. He is also the Chairman of
International Microcomputer Software, Inc., and Command Security Corporation, as
well as a director of Forward Industries Inc., GVI Security Solutions, Inc., and
Waiter.com.

      Daniel Bertram is the Chief Executive Officer. Mr. Bertram became CEO and
a Director 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.


                                       18
<PAGE>

      Gary Herman has been the Chairman of the Board since May 2005 and a
director of the company since August 2000. From August 2000 to May 2005 he was
also the company's Corporate Secretary. He is a Managing Member of Galloway
Capital Management, LLC, as well as Managing Director of Arcadia Securities,
LLC., a New York registered investment dealer. Prior to this, he was an
Associate Managing Director of 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 from 1993 to 1997. He is currently the chairman of the Board and Chief
Executive Officer of Digital Creative Development Corporation as well as
director of Shells Seafood Restaurants, Inc. He is a graduate of the State
University of New York at Albany.

      Thomas Leonardis has been a director since November 2001. He is currently
the President & CEO of Ember Industries, Inc., a contract manufacturing firm. He
is a senior executive with experience with companies such as Staefa 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. Mr. Leonardis graduated from Ohio Northern
University and has completed Financial Management through Northwestern
University as well as Executive Challenge through San Diego State University.

      Edward Kroning, Corporate Secretary and Sales Cell Leader. A graduate of
the University of Central Florida, Mr. Kroning came to DataMetrics(TM) with over
14 years of experience in purchasing, inventory and material and production
planning. Prior to his arrival at DataMetrics(TM), he was Director of Material
and Planning at Tri-Tech Electronics, Inc., an industry leader in custom and
build to print military and commercial interconnect systems.

      Rafik (Rob) Moursalien, Controller. Mr. Moursalien brings to DataMetrics
over 15 years of progressive experience in Accounting and Finance, Business
Management, and Network Administration. Before joining DataMetrics, he was
Controller at IBS Group, a Software Development Company serving State SBDC's,
Federal Government Agencies, and Chambers of Commerce. Mr. Moursalien holds a
Certified Public Accountant's License from the State of Delaware, the Certified
Administrative Manager's Designation from the Canadian Institute of Certified
Administrative Managers, and Novell's Certified Network Engineer Designation. He
also holds a Degree in Accounting from George Brown College, and a B.S. in
Business Management from LaSalle University.


      The audit committee of the Company is comprised of Thomas Leonardis. [The
second member of the audit committee resigned as a director in the Spring of
2003 and has not yet been replaced]. The audit committee has met three times
during FYE 2004. We currently do not have a financial expert as that term is
defined under Reg. S-B, ITEM 401 (e). The Company is diligently searching for
another Independent Director with the requisite financial expertise to become
part of the Audit Committee.

All Directors attended all of the Board of Director meetings in 2004.

                                       19
<PAGE>


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 no one in the
above categories failed to file the required reports.


CODE OF ETHICS

         The Code of Ethics is filed with the SEC as Exhibit 21.2.

ITEM 10. EXECUTIVE COMPENSATION

      The following table shows, for the fiscal year ended October 31, 2004, the
compensation earned by the current Chief Executive Officer of the Company.

                          SUMMARY COMPENSATION SCHEDULE
                               ANNUAL COMPENSATION

<TABLE>
<CAPTION>
                                                   Long Term Compensation
                                                   ----------------------
                                                   Awards                                             Payouts
                                                   --------                                           --------
                                                                                      Securities
                                                                                      Underlying
Name and                                           Other               Restricted     Options and     LTIP **    All
Principal           Fiscal      Base               Annual              Stock Awards   Warrants        Payouts    Other
Position            Year        Salary      Bonus  Compensation        ($)            (#)             ($)        Compensation
---------           -----       ------      -----  ------------        ------------   -----------     -------    ------------
<S>                   <C>        <C>         <C>   <C>                 <C>             <C>            <C>         <C>
Daniel Bertram       2004        $144,000      -   $ 14,400 (3)             -              -             -           - (4)
(1)(2)
(1)(2)

Daniel Bertram       2003        $144,000      -   $ 14,400 (3)        $ 7,244 (8)         -             -           - (4)
(1)(2)                                                                 $30,926 (9)

(1)(2)

Daniel Bertram       2002        $144,000      -   $ 14,400 (3)        $41,000 (7)     150,000 (6)        -          - (4)
(1)(2)
(1)(2)

Daniel Bertram       2001        $144,000      -   $  7,200 (3)             -        3,000,000 (5)        -          - (4)
(1)(2)
(1)(2)
</TABLE>


**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)   Rent & Car allowances.

(4)   Bonus.

(5)   Granted option in July 2001 for 3,000,000 shares.

(6)   Same options as 2001, but stated after a reverse 20 to 1 stock split

(7)   Stock Bonus of 2,041,365 shares at $.02 per share

(8)   Stock Bonus of 241,455 shares at $.03 per share in May of 2003

(9)   Stock Bonus of 2,061,765 shares at $.015 per share issued May 31, 2003


                                       20
<PAGE>

              AGGREGATED OPTION/SAR* EXERCISES IN LAST FISCAL YEAR
                          AND FY END OPTION/SAR VALUES

<TABLE>
<CAPTION>
                    Shares                                              Number of Exercisable        Value of Unexercised
                    Acquired on                    Value                Securities Underlying        In-the-money Options
Name                Exercise                       Realized             Unexercised Options at       At FY-End Exercisable
                                                                        FY-End
------------        --------------------           ----------------     ----------                   ----------
<S>                 <C>                            <C>                  <C>                          <C>
Daniel Bertram      None                           Not Applicable      150,000                       0
</TABLE>

DIRECTOR COMPENSATION

      In November 2001, the Company authorized the issuance of shares of common
stock to Messrs. Galloway, Bertram and Herman. In lieu of issuing stock on June
11, 2002, the Company awarded options to purchase the same number of shares of
common stock to Messrs. Bertram, Galloway and Herman. The exercise price was
$.0258 per share (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 incentive options for 2,041,365
shares of common stock. Mr. Herman received options for 765,512 shares in
consideration for his work in the restructuring of the Company's capital
structure in 2001 and 2002. Effective June, 2003, the Company canceled the
options and issued Messrs. Galloway, Bertram and Herman the shares otherwise
issuable under the options in consideration for their services to the Company
and the cancellation of the options and the underlying shares were issued to
Bertram, Galloway and Herman. Mr. Galloway transferred a portion of his shares
to Mr. Herman. Options to purchase 255,171 shares were also granted to Mr.
Friedenberg (who was a director as of October 31, 2002 but has subsequently
resigned), which options were subsequently canceled and the underlying shares
issued to Mr. Friedenberg.

      There are no standard arrangements for providing any other compensation to
Directors.


EMPLOYMENT AGREEMENTS

      Pursuant to an agreement with the Company dated June 2001 and extended in
2002, the Company agreed to employ Daniel Bertram as the President/Chief
Executive Officer through February 2004. His annual salary is $144,000. He also
receives a monthly automobile allowance, and participation in the Company's
benefit package. He will receive stock options and bonuses as determined by the
Board of Directors. To date, he has received options to purchase 150,000 shares
of Common Stock with an exercise price of $1.00. Options may be exercised
through June 2006.


                                       21
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTER

      The following table sets forth, as of February 10, 2006 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. The table below
refers only to common stock.

<TABLE>
<CAPTION>
                                                          Number of Shares            Percent of Shares
Name of Beneficial Owner                                 Beneficially Owned           Beneficially Owned
--------------------------------------------        ----------------------------------------------------------
<S>                                         <C>             <C>                             <C>
SG DMTI Capital, LLC                        (1)             386,314,860                     54.2%
DMTR, LLC                                   (1)             245,436,145                     75.2%
Daniel Bertram                              (2)              2,303,220                       0.7%
Bruce Galloway                              (2) (3)          1,879,928                       0.5%
Gary Herman                                 (2) (4)          1,320,000                       0.3%
Ed Kroning                                  (2)               256,048                        0.1%
                                            (5)
Rafik Moursalien                            (2)                  0                            0%
Thomas Leonardis                            (2)                  0                            0%

All Executive Officers &
Directors as a Group                                         5,759,196                       1.6%
</TABLE>

Notes:

(1)   Giving effect to the Warrant for 386,314,860 shares, the shareholder would
      own 54.2% of the common stock of the Company. SG Phoenix Ventures LLC is
      the managing member of SG DMTI Capital LLC. SG Phoenix Ventures LLC
      disclaims beneficial ownership of such securities beneficially owned by SG
      DMTI Capital LLC. Philip S. Sassower and Andrea Goren are managing members
      of SG Phoenix Ventures LLC, and each are members of DMTR, owning
      one-seventh of the membership interests of DMTR Messrs. Sassower and Goren
      disclaim beneficial ownership of such securities beneficially owned by SG
      DMTI Capital LLC and DMTR.

(2)   The addresses of each of these persons is c/o Datametrics Corporation,
      1717 Diplomacy Row, Orlando, Florida 32809.

(3)   Mr. Galloway is the managing member of DMTR. Mr. Galloway disclaims
      beneficial ownership of the shares owned by DMTR. His ownership includes
      1,634,928 shares he owns directly and 245,000 shares of common stock over
      which Mr. Galloway has indirect beneficial ownership.

(4)   Includes 120,000 shares of common stock issued to Digital Creative
      Development Corporation, of which Mr. Herman is Chairman and Chief
      Executive Officer.

(5)   Includes 14,592 shares of common stock jointly owned with Karen Kroning.


                                       22
<PAGE>

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS:

                                                           Number of Securities
                  Number of          Weighted-Average      remaining available
Compensation      Securities to      exercise price of     for future issuance
Plan              be issued upon     outstanding Options,  under equity compen-
Category          Exercise of:       Warrants and rights   sation plans.
--------          ------------       -------------------   --------------------

Approved by
Shareholders               None             None                 None

Not approved
By Shareholder   s         None             None                 None

      The Company does not know of any arrangements that may result in a change
in control of the Company, except for the security interest of DMTR LLC in
substantially all of the assets of the Company. See Note 11, Subsequent Events
for more details.

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.

      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 financing 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,. To the extent such assets and stock
are pledged to secure the Senior Bank Loan and the Bridge Financing, 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 Financing
to conform those terms to the terms of the Line of Credit.


                                       23
<PAGE>

      The Line of Credit matured on January 31, 2003. The Company is in default
of its obligations under the Line of Credit. In April 2001, DMTR agreed to
forgive $700,000 of principal obligations in exchange for the issuance of
14,000,000 shares of common stock or 700,000 shares on a post reverse stock
split. As part of the debt forgiveness, the Company shall continue to pay the
interest for the entire obligation. As additional consideration for the
financing 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 31, 2007.
The exercise price was subsequently lowered to $.24 per share, then $.075 per
share, then $.055 per share in consideration of certain default waivers. Such
issuance gives effect to the company's reverse stock split. DMTR has exchanged
$700,000 in principal amount of the Line of Credit for the issuance of 700,000
shares of common stock (with demand registration rights). The Company and DMTR
entered into a Standstill Agreement that provides for DMTR not to exercise any
of its default rights, so long as the parties negotiate in good faith to
restructure this obligation.

      The Company 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 issued approximately 5,019,434 shares of common stock in 2002
in connection with this exchange.


      The Company 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 issued approximately 3,200,000 shares of
common stock in 2002 in connection with this exchange When the exchange was
consummated, the holders of the 10% Notes and the 12% Notes waived all amounts
owing in respect of the notes, including principal, interest, premium and
penalty.

      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. Pursuant to the purchase agreement, such 600,000 shares of common
stock are convertible into 2,000,000 of the Company's common stock. In 2003, the
Company issued DCDC 2,400,000 shares of common stock prior to the stock split.
In addition, in November 2000, DCDC advanced $180,000 of $1,305,000 in bridge
loans to the Company. Such amount has been repaid with interest to DCDC.

      On December 7, 2001, the Company executed a letter agreement with
QuilCapCorp. ("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 or 275,000 post split shares
at a price of $1.20 per share. Employees of the Company purchased these notes
with the funds being advanced by the Company.


                                       24
<PAGE>
      On February 28, 2002, the Company awarded options to purchase shares of
common stock to Messrs. Bertram, Galloway and Herman. While the Company's Board
of Directors initially authorized the issuance of stock, the individuals elected
to accept options. Messrs. Bertram and Galloway each received options for
2,041,365 shares of common stock as management incentive options. Mr. Herman
received options for 765,512 shares in consideration for his work in the
restructuring of the Company's capital structure in 2001 and 2002. The exercise
price was $0.24 per share. Effective June, 2003, the Company canceled the
options and issued Messrs. Galloway, Bertram and Herman the shares otherwise
issuable under the options in consideration for their services to the Company.
Mr. Galloway transferred a portion of his shares to Mr. Herman. As such, Messrs.
Bertram, Galloway and Herman have 2,061,765, 1,634,927 and 1,200,000 shares
respectively.

      Recent developments in 2005 with respect to the loan from DMTR and the
restructuring of the Company's capital structure with other affiliated parties
is described under "Business - Recent Developments"


                                       25
<PAGE>

ITEM 13 EXHIBITS, LISTS AND REPORTS ON FORM 8-K

(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).

4.8            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).

4.17           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
               Exhibit4.3 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.


                                       26
<PAGE>

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 Exhibit 10.1 to the Registrant's 8-K dated September
               13, 1999).

10.8           Promissory Note payable to Branch Bank, dated as of August 20,
               1999(incorporated by reference to Exhibit 10.2 to the
               Registrant's 8-K dated September 13, 1999).

10.9           Security Agreement and Addendum with Branch Bank, dated as of
               August 20,1999 (incorporated by reference to Exhibit 10.3 to the
               Registrant's 8-K dated September 13, 1999).

10.10          Form of Guarantee and Addendum of each of the guarantors of the
               Registrant's line of credit with Branch Banking and Trust Company
               (incorporated by reference to Exhibit 10.4 to the Registrant's
               8-K dated September 13, 1999).

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).


                                       27
<PAGE>

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
               subdued 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).


10.26          Standstill Agreement with DMTR, LLC effective as of January 31,
               2003.

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.

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.


                                       28
<PAGE>

21.2           DataMetrics Corporation Code of Ethics (incorporated by reference
               to Exhibit 21.2 on the Registrant's Form 10-K filed on September
               30, 2005).

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).

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). 0 99.11
               Certification of Daniel Bertram, Chief Executive Officer, under
               the Sarbanes-Oxley Act of 2002 dated July 18, 2005.

99.12          Certification of Rafik Moursalien, Controller, under the
               Sarbanes-Oxley Act of 2002 dated July 18, 2005.


(b) Reports on Form 8-K - None


                                       29
<PAGE>



                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                   Form 10-KSB
                                                                           Page



Report of Independent Registered Public Accounting Firm...............        31

Consolidated Balance Sheet............................................        32

Consolidated Statements of Stockholders Equity (Deficit)..............        33

Consolidated Statements of Operations.................................        34

Consolidated Statements of Cash Flows.................................        35

Notes to the Consolidated Financial Statements........................     36-45


                                       30
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Audit Committee, Board of Directors and Stockholders
DataMetrics Corporation and Subsidiary
Orlando, Florida

We have audited the accompanying consolidated balance sheet of DataMetrics
Corporation and Subsidiary as of October 31, 2004, and the related consolidated
statements of operations, stockholders' deficits, and cash flows for the years
ended October 31, 2004 and October 31, 2003. 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 the standards of The Public Company
Accounting Oversight Board (United States). 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 audits provide 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 Subsidiary as of October 31, 2004, and the results of its
operations and its cash flows for the years ended October 31, 2004, and October
31, 2003 in conformity with accounting principles generally accepted in the
United States of America.



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

Gainesville, Florida
January 26, 2006


                                       31
<PAGE>

                     DataMetrics Corporation and Subsidiary
                           Consolidated Balance Sheet
                                October 31, 2004
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                               Oct 31,
                                                                                                2004
                                                                                              ----------
<S>                                                                                           <C>
ASSETS
Current Assets
           Cash                                                                               $       91
           Accounts receivable, net of allowance for doubtful accounts of $0                         667
           Inventory, net of allowance for obsolete inventory of $6,006                              497
           Other Current Assets                                                                       40
                                                                                              ----------
                                     Total current assets                                          1,295

Property and Equipment
           Building and improvements                                                               1,112
           Furniture, Fixtures and computer equipment                                              1,195
           Land                                                                                      420
           Machinery and equipment                                                                   547
                                                                                              ----------
                      Total Property and Equipment                                                 3,274
                      Less Accumulated Depreciation                                               (1,956)
                                                                                              ----------
                                     Net Property and Equipment                                    1,318

                                     Total Assets                                             $    2,613
                                                                                              ==========

LIABILITIES AND STOCKHOLDERS DEFICIT
Current Liabilities
           Accounts Payable                                                                   $      774
           Accrued Expenses                                                                          667
           Deferred Revenue                                                                          145
           Warranty Reserve                                                                           40
           Other Current Liabilities                                                                  20
           Current maturities of LT Debt                                                           3,102
                                                                                              ----------
                                     Total Current Liabilities                                     4,748

Long-Term Liabilities
           Long-Term Debt                                                                            719
           Refinance Cost                                                                           (155)
                                                                                              ----------
                                     Total Long Term Liabilities                                     564

                                                                                              ----------
                                     Total Liabilities                                             5,312

Stockholders deficit:
           4% Cumulative Preferred Stock, $.01 par value ($940,485 aggregate liquidation
                      preference); 40,000,000 Authorized; 892,656 issued and outstanding               9
           Common Stock, $.01 par value; 800,000,000 shares
                      Authorized; 32,113,103 issued and outstanding                                  321
           Additional Paid In Capital                                                             58,142
           Accumulated Deficit                                                                   (61,171)
                                                                                              ----------

                                                                                              ----------
                                     Total Stockholders Deficit                                   (2,699)
                                                                                              ----------

                                     Total Liabilities and Stockholders Deficit               $    2,613
                                                                                              ==========
</TABLE>

 The accompanying "Notes to Consolidated Financial Statements" form an integral
                           part of these statements.

                                       32
<PAGE>

                     DataMetrics Corporation and Subsidiary
            Consolidated Statements of Stockholders Equity (Deficit)
           For the years ended October 31, 2004 and October 31, 2003
                        (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                 Preferred
                                            Common     Stock      Stock        Stock       Treasury     Stock      Additional
                                           Number                  Number                  Number                   Paid-In
                                         of Shares     Amount    of Shares     Amount     of Shares     Amount      Capital
                                        ------------- --------- ------------ ----------- ------------ ----------- -------------
<S>                                         <C>         <C>     <C>          <C>         <C>          <C>         <C>

Balances at October 31, 2002             15,392,875     $154                                  0       $     -        $56,233

Conversion of Warrants                   11,782,455      118                                                           1,095

Issuance of Common Stock
  for Services                            5,881,260      58                                                               40

Treasury Stock obtained in
  exchange for Advances owed
  the company by Employees                                -                                  943,847    (120)

Net Loss
                                        ------------- --------- ------------ ----------- ------------ ----------- -------------

Balances at October 31, 2003             33,056,590     $330                 $     -       943,847      $(120)       $57,368

Reclassification of Stock
  Surrendered To Properly
  Reflect their Status as
  Cancelled                                (943,847)    $ (9)                             (943,847)      $ 120       $ (111)

Issuance of Preferred Stock                                      892,656            9                                    885

Fractional Difference from
  Transfer Agent                               (640)

Net Loss
                                        ------------- --------- ------------ ----------- ------------ ----------- -------------

Balances at October 31, 2004             32,112,103     $321      892,656     $    9             -    $     -        $58,142

<CAPTION>
                                                                 Preferred
                                                            Total
                                          Accumulated     Stockholders
                                            Deficit          Deficit
                                         --------------- ----------------
<S>                                      <C>             <C>

Balances at October 31, 2002               $ (58,543)       $ (2,156)

Conversion of Warrants                             -           1,213

Issuance of Common Stock
  for Services                                                    98

Treasury Stock obtained in
  exchange for Advances owed
  the company by Employees                        -             (120)

Net Loss                                      (2,005)         (2,005)
                                         --------------- ----------------

Balances at October 31, 2003               $ (60,548)       $ (2,970)

Reclassification of Stock
  Surrendered To Properly
  Reflect their Status as
  Cancelled                                                        -

Issuance of Preferred Stock                                      894

Fractional Difference from
  Transfer Agent

Net Loss                                        (623)           (623)
                                         --------------- ----------------

Balances at October 31, 2004               $ (61,171)       $ (2,699)
</TABLE>

 The accompanying "Notes to Consolidated Financial Statements" form an integral
                           part of these statements.


                                       33
<PAGE>

                     DataMetrics Corporation and Subsidiary
                      Consolidated Statements of Operations

           For the years ended October 31, 2004 and October 31, 2003
                 (in thousands, except per share and share data)

<TABLE>
<CAPTION>
                                                             2,004         2,003
                                                           ---------     ---------
<S>                                                          <C>            <C>
Sales                                                          4,443         3,480

Cost of Sales
           Purchases, manufacturing and overhead               3,323         2,560
                                                           ---------     ---------
Total Cost of Sales                                            3,323         2,560

Gross Profit                                                   1,120           920

Selling, general and administrative expenses                   1,371         1,887
                                                           ---------     ---------
Operating Loss from Operations                                  (251)         (967)

Other income (expense)
           Interest expense                                     (470)         (435)
           Directors Fees                                         --          (134)
           Bad Debt Allowance Recovery                            25           125
           Negotiated Settlements of Payable                      --           218
           Other Income                                           73           327
           Write off of Obsolete Inventory                        --        (1,139)
                                                           ---------     ---------
Total other income (expense)                                    (372)       (1,038)
                                                           ---------     ---------
Loss from continued operations
           before Provision for Income Taxes                    (623)       (2,005)
           Provision for Income Taxes                             --            --
                                                           ---------     ---------
           Net Loss                                             (623)       (2,005)
                                                           =========     =========

Loss per share of common stock, basic and diluted
           Continuing Operations                             (0.0194)       (0.089)
           Net Loss                                          (0.0194)       (0.089)
                                                           =========     =========
Weighted average number of common shares outstanding,
           basic and diluted                                  32,113        22,514
                                                           =========     =========
</TABLE>


 The accompanying "Notes to Consolidated Financial Statements" form an integral
                           part of these statements.


                                       34
<PAGE>

                             DataMetrics Corporation
                      Consolidated Statements of Cash Flows
            For the years ended October 31, 2004 and October 31, 2003
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                       2004          2003
                                                                                     ---------    ---------
<S>                                                                                  <C>          <C>
Cash Flows from Operating Activities:
         Net Loss                                                                         (623)      (2,005)
         Adjustments to Reconcile Net Loss to Net Cash Used
                in Operating Activities:
                Depreciation                                                                53           60
                Allowance for Obsolete Inventory                                            --        1,139
                Recovery of Warranty Liability                                             (16)          --
                Amortization of Refinancing Costs                                          205          155
                Expenses Paid from Warrant Proceeds                                         --          336
                Expenses Paid from Preferred Stock Proceeds                                 50           --
                Allowance for Bad Debts                                                    (25)        (125)

         Changes in assets and liabilities:
                Accounts Receivable                                                       (470)         262
                Inventories                                                                290         (127)
                Prepaid Expenses and Other Current Assets                                  (30)         (11)
                Accounts Payable                                                           (32)        (234)
                Other Current Liabilities                                                   15           --
                Accrued Expenses                                                            (6)        (227)
                Deferred Revenue                                                          (227)         372
                                                                                     ---------    ---------
Net cash used in operating activities                                                     (816)        (405)

Cash Flows from Financing Activities:
         Proceeds from Warrant Exercise                                                     --          460
         Payments on long-term debt                                                        (47)         (42)
         Proceeds from issuance of preferred stock                                         843           --
                                                                                     ---------    ---------
Net cash provided by financing activities                                                  796          418

Net (decrease) increase in cash                                                            (19)          13
Cash at the beginning of the period                                                        110           97
                                                                                     ---------    ---------
Cash at the end of the period                                                               91          110
                                                                                     ---------    ---------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
         Cash paid for Interest during the year, net:                                      220           90

         Income Taxes                                                                       --           --

         Treasury stock obtained when associates surrendered stock certificates
         in exchange for forgiveness of advances owed to the
         Company                                                                            --          120

         Cost of Refinancing paid by exercise of Warrants                                   --          515

         Expenses paid by exercise of Warrants                                              --          336

         Expenses paid by issuance of preferred stock                                       50           --
</TABLE>

 The accompanying "Notes to Consolidated Financial Statements" form an integral
                           part of these statements.


                                       35
<PAGE>

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.

Revenue Recognition and Related Warranty Reserves

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.

Accounts Receivable and Allowance for Doubtful Accounts

As is customary in the industry, the Company grants non-collateralized credit to
its clients, which include primarily the U.S. government and large multinational
corporations operating in a broad range of industries. Accounts receivable are
recorded at contract value. In order to mitigate its credit risk, the Company
continually evaluates the credit worthiness of its major commercial clients, and
maintains an allowance for potential losses within management expectations based
on past experience. Based on past experience and the client base, bad debts have
been extremely rare. Consequently, no allowance for doubtful accounts has been
provided.

An account is written off only after deemed worthless by a specific review of
management. Since collection problem with receivables are rare, the Company does
not have a policy of charging interest on overdue receivables.

Inventories

Inventories are stated at the lower of cost (first in, first-out) or market.


Property and Equipment

Property and equipment are recorded at cost. Depreciation is provided using the
straight-line method over the following estimated useful lives:

            Building and improvements                                   39 years
            Furniture, fixtures and computer equipment              3 to 8 years
            Machinery and equipment                                 3 to 8 years


                                       36
<PAGE>

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Basic and Diluted Net Loss per Common Share

Basic and diluted net loss per share are computed using the weighted-average
number of shares of common stock outstanding during the period. Potentially
dilutive securities have been excluded from the computation of diluted earnings
per share, as their effect is antidilutive. If the Company had reported net
income, diluted earnings per share would have included the shares used in the
computation of net loss per share plus common equivalent shares related to
1,724,925 and 7,175,866 outstanding options and warrants for the fiscal years
2004 and 2003 respectively.

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 (non-discounted 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 Statement of
Financial Accounting Standards (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.

Stock Based Compensation

The Company follows the provisions 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 Accounting Principles Bulletin
(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.

Statement of Cash Flows

For purposes of the statement of cash flows, the Company considers all highly
liquid investments purchased with a maturity of three months or less to be cash
equivalents.


                                       37
<PAGE>

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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. These estimates and assumptions affect the reported amounts of
assets, 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.

NOTE 2 - ACQUISITION OF SUBSIDIARY

In 2001, Datametrics Corporation acquired 100% of the stock of Peripheral
Equipment Corporation. Peripheral Equipment Corporation has been inactive since
2002. Consequently, no income or expense from this subsidiary is reported for
the years ended October 31, 2004 and 2003.

NOTE 3 - INVENTORIES

                                                      FY 2004         FY 2003
Inventories consist of the following:
(in thousands)
------------------------                            -----------     -----------
Inventory Parts and sub-assemblies                          393             533
Work in Process                                             104             254
Finished Goods                                                -              --
Obsolete Inventory                                        6,006           6,063
                                                    -----------     -----------
Total Inventory                                           6,503           6,850
Reserve for Obsolete Inventory                           (6,006)        (6,063)
                                                    -----------     -----------
Net Inventory                                               497             787

Inventory parts and sub-assemblies 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 with no activity within one year are classified as a
non-current asset and fully reserved.


                                       38
<PAGE>

NOTE 4 - LONG-TERM DEBT

Long-term debt at October 31, 2004 and October 31, 2003 consists of the
following:

                                                                     000s
                                                               -----------------
                                                                   2004    2003
                                                                   ----    ----

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 was 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. This note is
collateralized by the Orlando Facility.                            $780    $827

In December 1998, the Company closed a private placement of
approximately $3.45 million of 10% Subordinated Notes
originally due in December 2000 (the "10% Notes"). The 10%
Notes, which are unsecured and callable under certain
conditions, provided for the Company to issue 5-year warrants
exercisable into the Company's common stock at a price of
$1.50 per share. In 2002, the Company entered into an
agreement with 96% of the note holders. The terms of the
agreement provided the note holders with approximately
4,819,000 shares of Company stock in exchange for forgiveness
of balances due on their note holdings.                            141      141

In January 2001, the Company executed loan documents with
DMTR, LLC, a related party whose partners are major
stockholders and members of the Board of Directors of the
Company. The loan, secured by all assets of the Company,
accrues interest (payable monthly) at the base rate of
Citibank N.A. plus 100 basis points. The principal and
remaining interest was due in January 2003. As additional
consideration for the financing 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 and DMTR has exercised this warrant.            2,900    2,900

Total Long-Term Debt                                             3,821    3,868
Less: Current Maturities                                       (3,102)   (3,076)
                                                               -----------------
Net Long-Term Debt                                                $719    $ 792


The holders of the 10% subordinated notes and the DMTR, LLC loan have reached
agreements with the Company to extend the due dates of the loans pending
completion of the transaction described in note 11. The agreement calls for
repayment of the debts once the transaction is finalized.


                                       39
<PAGE>

Future payments required on long-term debt are as follows:

                                                          000's
                                                          -----
            2005                                               3,139
            2006                                                  98
            2007                                                  98
            2008                                                 600
                                                     ----------------
            Total                                              3,935
            Less Interest                                      (114)
                                                     ----------------
            Principal Balance                                  3,821
                                                     ----------------


NOTE 5 - REFINANCING COST

During 2003, the Company reached agreement with holders of its long term debt to
extend the due dates of the debt. As part of the negotiations to extend the
dates, the Company issued 7,000,000 shares of Company stock options to the debt
holders. The options, with an original exercise price of $0.07 per share were
valued, using the Black Scholes method, at $515,474. The value of these options
were capitalized as a component of long term debt and are being amortized over
the new expected lives of the related debt of 2 1/2 years. The balance of the
cost and related amortization to date of these costs as of October 31, 2004 and
2003 are as follows:

                                                    2004            2003
                                                    ----            ----
      Original Cost                               $515,474         $515,474
      Accumulate Amortization                    (360,832)        (155,474)
                                             ---------------------------------
      Unamortized Balance                         $154,642         $360,000
                                             ---------------------------------


NOTE 6 -  PREFERRED STOCK


In December 2003 through July 2004 various investors purchased an aggregate of
$892,656 of the Company's Preferred Series A Stock. The stock has a cumulative
dividend of four percent per annum and is convertible into shares of the
Company's common stock at $.06 per share. The consideration for such stock
consisted of $842,656 in cash and $50,000 in services and payment of expenses.
The proceeds of the offering were used for working capital.



                                       40
<PAGE>

NOTE 7 - STOCK BASED COMPENSATION

      The Company periodically provides for the granting of options to
employees, directors, and others as compensation for services rendered. The
options, including their exercise prices and terms, are initiated solely at the
discretion of the Board of Directors. These options generally are 100% vested
upon issuance.

The fair value of each option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumption for fiscal year
2003. No options were granted in Fiscal year 2004.

      Risk free interest rate of 3.7; dividend yield of 0%; expected lives of 4
      to 5 years; and volatility of 134%.

A summary of the status of the Company's stock options as of October 31, 2004
and October 31, 2003, and changes during those years are presented below:

<TABLE>
<CAPTION>
                                                                            2004                     2003
                                                                -------------------------- ---------------------------
                                                                              Weighted                   Weighted
                                                                              Average                     Average
                                                                  Shares   Exercise Price   Shares     Exercise Price
                                                                  (000s)                    (000s)
<S>                                                                  <C>          <C>          <C>           <C>
Outstanding at Beginning of Year                                     2,112        $5.27        12,348        $1.13
Granted                                                                  0                      7,000        0.055
Exercised                                                                0                     11,783        0.055
Expired / Canceled                                                     387        22.95         5,453        0.258
                                                                -----------   ----------    ----------  -----------
Outstanding and Fully Exercisable at
     the End of the Year                                             1,725        $1.31         2,112        $5.27
                                                                ===========   ==========    ==========  ===========
Weighted  Average Fair Value of Options  Granted  During the
     Year                                                                $0.0                       $0.0628
                                                                         ====                       =======
</TABLE>

There were no options issued to employees in fiscal year 2004, and therefore no
compensation expense under APB No. 25 was recorded.

Significant option groups outstanding at October 31, 2004 and 2003 and related
weighted average life information is as follows:

<TABLE>
<CAPTION>
                          2003                                              2004
                         Number                                             Number
                    Outstanding and     Weighted Average                Outstanding and    Weighted Average
                         Fully             Remaining                         Fully            Remaining
   Exercise           Exercisable         Contractual      Exercise       Exercisable        Contractual
 Price (Range)           (000s)           Life (YEARS)      Price           (000s)           Life (YEARS)
 -------------           ------           ------------      -----           ------           ------------
<S>                     <C>                  <C>            <C>              <C>                  <C>
     $35-$36                5                 .53           $1.40            1,500                7.05
     $27-$30              190                0.29            1.00              150                2.61
     $20-$22              154                0.77           0.055               75                3.00
       $1-$2            1,663                7.55
       $0.12               25                1.00
      $0.055               75                4.00
                -------------                                         ------------
Total                   2,112                          Total                 1,725
                =============                                         ============
</TABLE>


                                       41
<PAGE>

The Company accounts for its options issued to employees under the recognition
and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to
Employees. For both 2004 and 2003, there is no effect on net loss because no
options were issued to employees as compensation and, consequently no proforma
net income or earning statement using methods described under SFAS No. 123 are
necessary. However, in 2003, 7,000,000 options were issued to holders of long
term debt in connection with the modification of debt repayment terms. The
options were valued at $515,474 using the fair value measurement provisions of
FASB Statement No. 123. The calculated value of these options was capitalized as
part of the related long-term debt and is being amortized over the expected life
of the debt as related refinancing costs. There is no effect on net loss for
these options.

NOTE 8 - WARRANTY RESERVES

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 table below outlines warranty accruals and related costs for the fiscal
years ending October 31, 2004 and 2003 respectively.

                                                          $000's
                                               FY 2004        FY 2003
Beginning Warranty Reserve                          61             61
Warranty Accrual / Recovery                       (16)              5
                                           ---------------------------
                                                    45             66
Warranty Expense                                     5              5
                                           ---------------------------

Ending Warranty Reserve Balance                     40             61
                                           ===========================

                                       42
<PAGE>

NOTE 9 - INCOME TAXES

The primary components of the Company's deferred tax assets and liabilities are
as follows:

<TABLE>
<CAPTION>
                                                           (dollars in thousands)
                                                            2004           2003
                                                        -----------     -----------
<S>                                                     <C>             <C>
Deferred tax assets:
Operating loss carryforwards                            $  21,933.3     $  21,619.3
 Non-deductible accruals and allowances,
 and other
                                                            3,376.1         3,442.1
                                                        ---------       ---------

Total Deferred Income Tax Asset                            25,309.4        25,061.4
Valuation Allowance for Deferred Income Tax Assets
                                                          (25,309.4)      (25,061.4)
                                                        -----------     -----------

Net Deferred Income Tax Assets                          $        --     $        --
                                                        ===========     ===========
</TABLE>

Net operating loss carryforwards of approximately $55 million for federal income
tax purposes will expire at various times and in varying amounts between 2010
and 2023.


The provision for income taxes is comprised of the following

                                             2004                2003
                                                 (dollars in thousands)
------------------------------------- ------------------- -------------------
Current:
------------------------------------- ------------------- -------------------
     Federal                               $ -0-               $ -0-
------------------------------------- ------------------- -------------------
     State                                 $ -0-               $ -0-
------------------------------------- ------------------- -------------------
Deferred
------------------------------------- ------------------- -------------------
     Federal                               $ (211.9)           $ (626.0)
------------------------------------- ------------------- -------------------
     State                                 $ ( 36.1)           $ (106.7)
------------------------------------- ------------------- -------------------
Increase in Valuation  Allowance
                                           $  248.0            $  732.7
------------------------------------- ------------------- -------------------
Net                                        $   -0-             $   -0-
------------------------------------- ------------------- -------------------

The increase in the valuation allowance is provided here and against all
deferred tax assets due to the uncertainty as to their future realization .
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.


                                       43
<PAGE>

NOTE 10 - CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS

Approximately 80% and 70% of the Company's sales during fiscal years 2004 and
2003, 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 $240,241 or 5% of total sales in fiscal year 2004.
Export sales to foreign customers amounted to $103,000 or 2.9% of sales in
fiscal year 2003. The Company's three largest customers accounted for 25%, 19%
and 19% of the Company's sales for the fiscal year ended October 31, 2004. Its
three largest customers accounted for 26%, 21% and 20% of the Company's sales
for the fiscal year ended October 31, 2003. The Company's three largest
customers accounted for 33%, 10% and 27% of account receivable in the fiscal
year ended October 31, 2004. The Company's three largest customers accounted for
23%, 13% and 20% of account receivable at October 31, 2003. Accounts receivable
from the US Government totaled $119,767 or 18% of total accounts receivable as
of October 31, 2004.

The Company maintains its cash balances in one financial institution. The
balances are insured by the Federal Deposit Insurance Corporation up to
$100,000. At October 31, 2004, the Company had no uninsured cash balances.

NOTE 11 - SUBSEQUENT EVENTS

      In July 2005, the company was presented with a proposal from SG DMTI, LLC
("SGD"), an affiliated entity of two members of DMTR, LLC., who are also
principal shareholders of the Company. The proposal was approved by the
Company's Board of Directors.

      In July 2005, an affiliate of SGD acquired the Company's outstanding
mortgage with SouthTrust (now Wachovia) Bank. In July and August 2005, SGD
loaned the Company an aggregate of $410,000, which the Company has used to pay
taxes owed on its real estate and for working capital.

Pursuant to the proposal, SGD acquired the Company's real property in Orlando
for $1,500,000 effective November 1, 2005. SGD and the Company entered into a
five-year triple net lease with an annual rent obligation of approximately
$150,000. On November 8, 2005, SGD also loaned the Company $200,000 pursuant to
a promissory note secured by all the Company's assets and due on December 7,
2005 (the "Bridge Note").

      On December 30, 2005, the Company converted certain debt and all of its
outstanding shares of Series A Cumulative Convertible Redeemable Preferred Stock
(the "Series A Preferred Stock" into Common Stock of the Company (the
"Restructuring") as follows:

      (1) Pursuant to a Loan Termination and Conversion Agreement between the
      Company and DMTR, LLC ("DMTR"), DMTR agreed to convert debt owed to DMTR
      by the Company (which debt consisted of an aggregate principal amount of
      $2,900,000 and accrued, but unpaid interest on the unpaid principal amount
      ) (the "DMTR Loan") into 244,736,145 shares of common stock of the
      Company. DMTR also agreed to terminate its security interest in the
      Company's assets that it held as security for the DMTR loan. The
      244,736,145 shares do not give effect to a proposed one (1) for thirty
      (30) reverse stock-split which the Company intends to consummate in
      February 2006 as described below (the "Reverse Stock Split").

      (2) The Company and the holders of the Company's issued and outstanding
      892,652 shares of Series A Preferred Stock, representing all of the issued
      and outstanding shares of Series A Preferred Stock of the Company,
      converted such shares into 48,927,229 shares of common stock of the
      Company, before giving effect to the Reverse Stock Split.


                                       44
<PAGE>

      In connection with the Restructuring, on December 30, 2005 the Company
entered into a Series B Preferred Stock and Warrant Purchase Agreement (the
"Purchase Agreement") with SG DMTI Capital LLC ("SG"), pursuant to which SG
purchased 500,000 shares of the Company's Series B Preferred Stock and has the
right to purchase an additional 500,000 shares of Series B Preferred Stock at a
price of $1.00 per share. Pursuant to the Purchase Agreement, on December 30,
2005, the Company issued SG 500,000 shares of Series B Preferred Stock in
exchange for the cancellation of an aggregate of $499,563 in principal and $467
in accrued interest on certain promissory notes (the "Notes") issued by the
Company and held by SG. The obligation of SG to purchase additional shares of
Series B Preferred Stock is contingent upon the satisfaction of certain
conditions, including:

      (a) the Company shall be current and shall have timely filed with the SEC
      reports, schedules, registration statements and definitive proxy
      statements that the Company is required to file with the SEC; and

      (b) the Company shall have been in compliance with a budget in accordance
      with the Purchase Agreement for at least 6 months;

      Upon satisfaction of the aforementioned conditions, the Company will have
the right to request SG to purchase an additional 125,000 shares of Series B
Preferred Stock for $125,000 for each quarter in which the Company's quarterly
revenues for the fiscal quarter immediately preceding it are of at least
$1,500,000, and/or the Company's average quarterly revenues for the two fiscal
quarters immediately preceding it are of at least $1,500,000. In the event that
the Company should not meet the $1,500,000 threshold in any fiscal quarter, but
the average quarterly revenues of this quarter and the fiscal quarter
immediately following it are of at least $1,500,000, then the Company will have
the right to request SG to purchase an additional 250,000 shares of Series B
Preferred Stock for $250,000.

Note 12 - RELATED PARTY DISCLOSURE

For the year ended October 31, 2004 a balance of $10,000 was reported as due
from DMTR, LLC as a result of proceeds collected from Warrants exercised but not
remitted to the Company. This balance was shown as Other Current Assets on the
Balance Sheet. The balance was offset against expenses owed to DMTR, LLC from
the Company in 2004.

As discussed in Note 4, the Company owed DMTR, LLC, a company under common
control, long term debt of $2,900,000.


                                       45