DATAMEG CORP (Form: 10QSB, Received: 11/14/2005 17:42:00)

10QSB/A 1 d10qsba26.htm DATAMEG CORP (Form: 10QSB, Received: 11/14/2005 17:42:00)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB/A

[x]

QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the quarterly period ended June 30, 2006

[ ]

TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the transition period from to
Commission file Number 333-128060

Datameg Corporation

(Name of Small Business Issuer in Its Charter)

Delaware		13-3134389
(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification Number)
2150 South 1300 East, Suite 500, Salt Lake City, UT		84106
(Address of principal executive offices)		(Zip Code)

Issuer’s telephone number: (866) 739-3945

Check whether issuer (1) filed all reports to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [x]

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date. There were 373,983,231 shares of common stock outstanding as of July 31, 2007.

Transitional Small Business Disclosure Format (Check one): Yes [ ] No [x]

PART I

Item 1. Financial Statements
INDEX

Datameg Corporation

(A Development Stage Enterprise)

Consolidated Financial Statements (unaudited)

For the Three and Six Months Ended June 30, 2005 and 2006

CONTENTS
Consolidated Balance Sheets		2
Consolidated Statements of Operations		3
Consolidated Statements of Cash Flows		4
Notes to Consolidated Financial Statements		5

Datameg Corporation
(A Development Stage Enterprise)
Consolidated Balance Sheets



					December 31,		June 30,
					2005		2006
							(unaudited)
							(Restated – Note N)
ASSETS

CURRENT ASSETS:
	Cash			$	11,936	$	2,182
	Accounts receivable, net				7,100		-
	Inventory				159,788		152,478
			Total current assets		178,824		154,660

PROPERTY AND EQUIPMENT, net					367		-

OTHER ASSETS:
	Goodwill				206,746		206,746
	Prepaid and deferred expenses				27,187		392
	Deposits				7,218		7,218
			Total other assets		241,151		214,356

			Total assets	$	420,342	$	369,016


LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
	Accounts payable and accrued expenses			$	2,689,909	$	2,634,169
	Deferred revenue				7,344		9,705
	Due to related parties				56,760		56,760
	Convertible promissory notes, net of amortization				267,949		27,783
	Promissory notes				843,809		1,063,015
			Total current liabilities		3,865,771		3,791,432

			Total liabilities		3,865,771		3,791,432

COMMITMENTS AND CONTINGENCIES					-		-

MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY					(67,939)		(67,939)

STOCKHOLDERS' DEFICIT:
	Preferred stock, $0.0001 par value; none and 10,000,000 shares authorized;
		none issued or outstanding at December 31, 2005 or June 30, 2006
	Common stock, $.0001 par value; 493,000,000 shares authorized and
		320,458,313 shares issued and outstanding at December 31, 2005; $.0001 par value, 493,000,000 shares authorized
		and 330,813,359 shares issued and outstanding at June 30, 2006			32,046		33,081
	Common stock subscriptions receivable				(420,056)		(420,056)
	Stock to be issued				375,763		170,250
	Additional paid-in capital				30,211,296		31,296,193
	Accumulated deficit during development stage				(33,576,539)		(34,433,945)
			Total stockholders' deficit		(3,377,490)		(3,354,477)

			Total liabilities and stockholders' deficit	$	420,342	$	369,016

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

Datameg Corporation and Subsidiaries
(A Development Stage Enterprise)
Consolidated Statements of Operations



				For the three		For the three		For the six		For the six		Cumulative
				months ended		months ended		months ended		months ended		from inception
				June 30,		June 30,		June 30,		June 30,		(Jan. 13, 1999)
				2005		2006		2005		2006		to June 30, 2006
				(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
						(Restated – Note N)				(Restated – Note N)		(Restated – Note N)

REVENUE
	Hardware and software sales		$	10,974	$	-	$	10,974	$	22,160	$	94,100
	Maintenance and support fees			3,132		-		5,969		3,879		18,790
	Consulting fee income			-		-		-		-		4,750
		Total revenue		14,106		-		16,943		26,039		117,640


COST OF REVENUES				32,600		-		34,740		10,195		76,838
	Gross Profit			(18,494)		-		(17,797)		15,844		40,802

OPERATING EXPENSES:
	General and administrative			1,120,786		158,855		1,591,615		655,483		23,375,818
	Selling and marketing			46,769		24,892		69,785		63,164		2,341,836
	Research and development			258,961		-		460,299		94,259		6,243,606
		Total operating expenses		1,426,516		183,747		2,121,699		812,906		31,961,260

	Loss from operations			(1,445,010)		(183,747)		(2,139,496)		(797,062)		(31,920,458)

OTHER INCOME (EXPENSES):
	Interest income			-								225
	Interest expense			(416,831)		(29,017)		(892,838)		(68,344)		(2,876,430)
	Loss on acquisition fee			-								(123,950)
	Gain (loss) on disposal of property and equipment			-		-		12				(1,422)
	Loss on impairment of patents			-		-		-		-		(127,274)
	Gain (loss) on litigation			-		-		-		-		(159,240)
	Realized gains on sale of securities											8,530
	Write off of debt			-		4,000		-		8,000		519,860
		Total other income (expense)		(416,831)		(25,017)		(892,826)		(60,344)		(2,759,701)


LOSS BEFORE BENEFIT FOR INCOME
	TAXES AND MINORITY INTEREST		$	(1,861,841)		(208,764)	$	(3,032,322)		(857,406)		(34,680,159)

	Benefit for income taxes			-		-		-		-		-

LOSS BEFORE MINORITY INTEREST			$	(1,861,841)		(208,764)	$	(3,032,322)		(857,406)		(34,680,159)

MINORITY INTEREST				-		-		-		-		246,214

NET LOSS			$	(1,861,841)	$	(208,764)	$	(3,032,322)	$	(857,406)	$	(34,433,945)

Net loss per common share
	(basic and diluted)		$	(0.01)	$	(0.00)	$	(0.01)	$	(0.00)

Weighted average number of common
	shares outstanding			296,961,011		330,813,359		296,961,011		330,813,359

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

Datameg Corporation and Subsidiaries

(A Development Stage Enterprise)

Consolidated Statements of Cash Flows

			From Inception
	Six Months Ended		(January 13, 1999) to
	June 30,		June 30,
	2006	2005	2006
	*(Restated – Note N)*

CASH FLOWS FROM OPERATING ACTIVITIES
NET LOSS	(857,406)	(3,032,322)	(34,433,945)
			-
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATIONS:			-
Depreciation	367	9,514	91,301
Stock issued for purchase of in-process research and development	-	-	870,600
Common shares issued for services or reimbursement	199,750	163,371	12,863,197
Vesting of stock options issued for services	186,065	1,034,646	5,489,331
Property and equipment given in lieu of cash for services	-	-	15,475
Realized gain on sale of investments	-	-	(8,530)
(Gain) Loss on sale of property and equipment	-	(12)	13
Loss on acquisition fee	-	-	123,950
Loss on disposal of property and equipment	-	-	1,459
Loss on impairment of patent	-	-	127,274
Loss on litigation	-	-	159,240
Minority interest	-	-	(154,550)
Stock issued in lieu of financing costs	-	-	140,250
Write-off of debt	(8,000)	-	(519,860)
Amortization of beneficial conversion	-	-	1,332,516
CHANGES IN OPERATING ASSETS
AND LIABILITIES:
(Increase) Decrease in accounts receivable	7,100	50	-
(Increase( Decrease in inventory	7,310	(43,254)	(152,478)
(Increase) Decrease in prepaid and deferred expenses	26,795	(3,210)	9,725
Decrease in deposits	-	-	24,752
Increase in accounts payable and accrued expenses	68,904	80,655	2,949,236
Increase in deferred revenues	2,361	19,347	9,705
Increase (Decrease) in related party payables	-	(9,286)	247,682
NET CASH USED IN OPERATIONS	(366,754)	(1,780,501)	(10,813,657)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment	-	(663)	(96,957)
			-
Payments for intangible assets	-	-	(127,274)
Payments for security deposits	-	-	(91,532)
Investment in subsidiary	-	-	(149,312)
Purchase of investments	-	-	(20,000)
Sales of investments	-	-	28,530
NET CASH USED IN INVESTING ACTIVITIES	-	(663)	(456,545)
DATAMEG CORPORATION
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows (Continued)
			From Inception
	Six Months		(January 13, 1999) to
	June 30,		June 30,
	2006	2005	2006

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from shareholder loan	-	-	26,000
Payments on shareholder loan	-	-	(26,000)
Proceeds from short-term loans	-	-	130,909
Payments on capital lease obligation	-	-	(32,002)
Proceeds from issuance of common stock	120,500	1,000	4,633,467
Proceeds from stock to be issued	-	-	1,943,963
Proceeds from investment in subsidiary	-	-	25,000
Proceeds from issuance of warrants	-	-	25,000
Payments on promissory notes	(5,000)	50,000	(145,349)
Payment for treasury stock	-	-	(125,392)
Proceeds from issuance of convertible notes	-	815,352	2,501,672
Proceeds from issuance of promissory notes and debentures	241,500	1,002,846	2,315,116
NET CASH PROVIDED BY FINANCING ACTIVITIES	357,000	1,869,198	11,272,384

NET CHANGE IN CASH	(9,754)	88,034	2,182

CASH, BEGINNING OF PERIOD	11,936	-	-

CASH, END OF PERIOD	$2,182	$88,034	$2,182

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING

AND FINANCING ACTIVITIES:
Financing of property and equipment with capital lease	$ -	$ -	$ 42,540
Issuance of stock in exchange for notes receivable	$ -	$ -	$ 656,251
Issuance of stock in exchange for promissory notes	$ -	$ -	$ 304,155
Stock issued as a reduction of ’Stock to be Issued’	$ 366,013	$ 1,625,164	$ 4,122,697
Stock issued in lieu of deferred financing costs	$ -	$ -	$ 140,250
Stock issued in lieu of deferred compensation	$ -	$ -	$ 47,400
Stock issued in purchase of subsidiary	$ -	$ -	$ 483,658
Stock issued as a reduction of amounts due to stockholders	$ -	$ -	$ 220,500
Conversion of notes payable to common stock	$ 64,087	$ 763,441	$ 763,441

SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Interest paid	$ -	$ -	$ 6,612
Income taxes paid	$ -	$ -	$ -

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A. BASIS OF PRESENTATION AND ORGANIZATION

Datameg Corporation is a technology holding company focused through the Company’s subsidiaries on developing new technologies, software applications, and products primarily serving the telecommunications sector.

Datameg Corporation has two subsidiaries: CASCommunications, Inc., a Florida corporation, of which the Company owns 40%, and QoVox Corporation, a North Carolina corporation that the Company wholly owns. QoVox was known as North Electric Company, Inc. until July 1, 2005, when North Electric Company filed an Amendment to its Articles of Incorporation with the North Carolina Secretary of State to change its corporate name. Datameg and its subsidiaries individually and collectively are a development stage enterprise. CASCommunications is an inactive company. Datameg does not expect CASCommunications to generate any revenue in 2006.

QoVox focuses on becoming a provider of network assurance products and services. QoVox’s network assurance products are designed to enable communications network operators and service providers to quickly and automatically determine if their network is meeting its quality and service expectations, while lowering network operating costs. QoVox has developed their Network Assurance System that covers the existing traditional telephone networks, networks that use the same communication technology as the Internet, and converged networks comprised of both of these network types.

During the second half of 2004, QoVox began to deploy equipment to customer sites under three purchases on approval agreements. In October 2004, QoVox obtained its first approved purchase and recorded approximately $41,000 in revenues in 2004 related to the purchase.

During the first quarter ended March 31, 2006, QoVox recorded revenue of approximately $22,160 and no additional revenue as of June 30, 2006. QoVox is actively pursuing additional near-term sales opportunities with its existing customer and others for its Network Assurance System and anticipates realization of these opportunities in the near-term.

These consolidated financial statements reflect those of Datameg Corporation, CASCommunications, Inc. and QoVox Corporation. In accordance with the Financial Accounting Standards Board ("FASB") interpretation ("FIN") 46 "Consolidation of Variable Interest Entities and Interpretation of ARB No. 51," the Company continues to consolidate CASCommunications, Inc. as it expects to continue to absorb a majority of CASCommunications, Inc.’s losses.

CASCommunications had no recorded assets as of June 30, 2006 and had a loss before minority interest of zero for the three and six months ended June 30, 2006 due to the lack of activity in 2006. No consolidated assets are collateral for liabilities of CASCommunications. Datameg has provided $270,000 of the total capital of $388,000 provided to CASCommunications as of June 30, 2006.

Datameg Corporation is a Delaware corporation that is a successor by merger as of April 27, 2005 to DataMEG Corp., which was a New York corporation incorporated in October 1982 as The Viola Group, Inc. In August 2000 the Company exchanged 90% of its common stock for 100% of the stock of Datameg Corporation, a Virginia corporation, which was incorporated in January 1999. The Company subsequently changed its name to Datameg Corporation and is the successor in business operations of the Virginia Datameg and New York Datameg.

On April 27, 2005, we entered into an Agreement and Plan of Merger with Datameg Corp. NY setting forth the terms of our reincorporation from New York to Delaware. As part of the reincorporation the Company increased its authorized number of shares to 503,000,000, of which 10,000,000 are preferred shares and 493,000,000 are common stock. The Company also changed its par value from $0.01 to $0.0001 per share.

On July 1, 2005, our wholly owned subsidiary, QoVox Corporation, filed Articles of Amendment to its Articles of Incorporation, changing its corporate name from North Electric Company, Inc. to QoVox Corporation. The new corporate name better reflects QoVox’s core business of helping service providers assure the quality of Voice over Internet Protocol (VoIP) and other next generation IP-based services.

The Company operates under the name of Datameg Corporation and trades under the symbol DTMG on the OTC-BB. The Company’s sole active subsidiary is QoVox Corporation, which the Company wholly owns.

Except for the consolidated balance sheet of the Company as of December 31, 2005, which is derived from audited financial statements, the accompanying consolidated financial statements are unaudited. In the opinion of management, all adjustments (consisting of normal recurring items) necessary for a fair presentation of such financial statements have been included. Interim results are not necessarily indicative of results for a full year.

The consolidated financial statements and notes are presented as required by Form 10-QSB and do not contain certain information included in the Company’s annual financial statements and notes. These financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto filed with the Securities and Exchange Commission in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2005.

B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Share-Based Payment

Effective January 1, 2006 the Company adopted Statement of Financial Accounting Standards No. 123 (Revised 2004), "Share-Based Payment" ("SFAS 123R"), which requires the measurement and recognition of compensation cost at fair value for all share-based payments including stock options. The adoption of SFAS 123R did not have an impact on the Company’s financial position or results of operations as the Company had previously followed the fair value method under SFAS No. 123.

RECENT ACCOUNTING PRONOUNCEMENTS:

In February 2006, the FASB issued Statement of Financial Accounting Standards No. 155, "Accounting for Certain Hybrid Financial Instruments – an amendment of FASB Statements No. 133 and 140" which is effective for fiscal years beginning after September 15, 2006. This statement was issued to clarify the application of FASB Statement No. 133 to beneficial interests in securitized financial assets and to improve the consistency of accounting for similar financial instruments, regardless of the form of the instruments. The provisions of SFAS 155 are not expected to have an impact recorded at adoption.

In March 2006, the FASB issued Statement of Financial Accounting Standards No. 156, "Accounting for Servicing of Financial Assets – an amendment of FASB Statement No. 140", which is effective for fiscal years beginning after September 15, 2006. This statement was issued to simplify the accounting for servicing rights and to reduce the volatility that results from using different measurement attributes. We have evaluated the new statement and have determined that it will not have a significant impact on the determination or reporting of our financial results.

C. INVENTORY

Inventory at December 31, 2005 and June 30, 2006 was $159,788 and $152,478, respectively, and all inventory was comprised of either raw materials and or finished goods.

		December 31, 2005			June 30, 2006 (unaudited)
Raw Materials Inventory	$		48,364	$		44,062
Finished Goods	$		111,424	$		108,416
Total Inventory	$		159,788	$		152,478

The Company assembles finished goods for specific sale on approval contracts.

D. CONVERTIBLE SUBORDINATED DEBENTURES

In July 2000, the Company issued convertible subordinated debentures totaling approximately $140,000. The terms of these debentures require interest payable at twelve percent per annum payable quarterly with a maturity date of one year from the date of advance unless mutually extended. The debentures are subordinate and junior to existing liabilities of the Company and any subsequent borrowings from banks or insurance companies. The debentures were convertible into common stock at a price of $2.50 per share at any time prior to maturity. During 2000 and 2003, approximately $120,000 of the convertible subordinated debentures were converted resulting in the issuance of 71,033 shares of common stock. The remaining convertible subordinated debentures totaling $20,000 were written off at December 31, 2005 due to the age of the debentures and the remote likelihood that they would be called or converted. The restatement of the December 31, 2005 financial statements is disclosed in Note T filed with the 2006 Form 10-KSB filed with the SEC on May 18, 2007. The roll-forward of this restatement is disclosed in Note N to these financial statements..

E. CONVERTIBLE NOTES:

In the period April through December 2004, the Company entered into agreements to issue convertible notes in the aggregate amount of $1,088,995 and convertible into an aggregate of approximately 23,392,000 shares. The notes automatically converted to shares on the respective conversion dates. A beneficial conversion value was recognized as debt discount and paid in capital was added in the amount of $855,328. For the year ended December 31, 2005, the discount amortized to interest expense was approximately $847,000. For the year ended December 31, 2004, the discount amortized to interest expense was approximately $8,000. By June 30, 2006, all of the notes had been converted.

F. CONVERTIBLE NOTES WITH DETACHABLE WARRANTS

In the period January through December 2005, the Company entered into agreements to issue convertible notes with detachable warrants in the amount of $1,647,507. The convertible notes accrue simple interest at an annual rate of either 1.47% or 5.0% and convert any time between three and six months of the date of the agreement or upon the automatic conversion date, which ever comes first. The Company elected to allow certain investors to accelerate the conversions. The notes converted or are to be converted into approximately 30,500,000 shares. The notes converted into 30,494,538 shares during 2005. The Company issued 25,542,871 of these shares during 2005, and the balance of 4,951,667 shares were issued in the first and second quarters of 2006. The detachable warrants issued during 2005 were valued under a Black-Scholes model and a debt discount of approximately $725,000 was recorded and added to paid in capital. In addition, a beneficial conversion value of approximately $1,300,000 was recognized as a debt discount and added to paid-in capital and amortized to interest expense during 2005. The principal balance owed on these notes at June 30, 2006 and December 31, 2005 was $27,783 and $267,949, respectively.

G. DUE TO STOCKHOLDERS AND OFFICERS

As of December 31, 2005 and June 30, 2006, the Company was indebted to officers and stockholders in the amount of $56,760 for expenses incurred on behalf of the Company. This is exclusive of amounts included in accrued compensation, which is included in accounts payable and accrued expenses. Interest was not imputed due to its immaterial impact on the financial statements.

H. PROMISSORY NOTES

On October 29, 2001, the Company signed a confessed judgment promissory note with a law firm acknowledging monies owed amounting to $568,382, which had been previously accrued. The balance of the promissory note accrued interest at a rate of 9% and matured on December 31, 2001. On January 7, 2002, the Company received a notice of default relating to the Promissory Note and as of January 1, 2002 the outstanding balance was increased five percent (5%) and began to accrue interest at an annual rate of 15%. The principal balance at December 31, 2005 and June 30, 2006 was $596,802, while accrued interest and legal fees totaled $372,183 and $416,994 as of December 31, 2005 and June 30, 2006, respectively. Accrued interest and legal fees have been reclassified to accounts payable and accrued expenses (see Note N for restatement details).

In July 2003, the Company signed a promissory note with a professional for fees and the interest on unpaid fees due that professional through June 30, 2003 in the amount of $247,507. The note was guaranteed personally by the Company’s former Chairman. The promissory note has a stated interest rate of 18% per annum and was due and payable on August 15, 2003. No significant payments have been made to date and the Company is in default with respect to this note. Since default, additional interest of 2% per thirty calendar day period has been accruing as liquidated damages. The principal balance at December 31, 2005 and June 30, 2006 was $247,007. According to the Company, its independent legal counsel, and various Florida statutes, it is considered unlawful for a creditor to charge in excess of 18% interest per annum on a note of this nature. The Company has concluded that excess interest expense had been recorded since the Company defaulted on the loan. Accordingly, accrued interest and interest expense were reduced by approximately $38,000 and $15,000 during the years ended December 31, 2005 and 2006, respectively, resulting in accrued interest balances of $111,153 and $140,881 at December 31, 2005 and June 30, 2006, respectively, which has been reclassified to accounts payable and accrued liabilities. The restatement of the December 31, 2005 financial statements is disclosed in Note T filed with the 2006 Form 10-KSB filed with the SEC on May 18, 2007. The roll-forward of this restatement is disclosed in Note N to these financial statements.

On March 28, 2006, the Company issued unsecured promissory notes for back compensation due in the aggregate of $224,206 to 3 Ohio software consultants. These notes are to be paid in 6 quarterly installments and bear interest of 7% per annum. At June 30, 2006, $5,000 in payments had been made on the notes, resulting in total principal balance of $219,206. Accrued interest of $7,740 is included in accounts payable and accrued expenses. Since the events leading to the settlement were in existence at December 31, 2005, management recorded the write-down of approximately $79,500 as other income during the year ended December 31, 2005. The restatement of the December 31, 2005 financial statements is disclosed in Note T filed with the 2006 Form 10-KSB filed with the SEC on May 18, 2007. The roll-forward of this restatement is disclosed in Note N to these financial statements.

I. OTHER LIABILITIES

Restatement:

During 2006 and 2007, the Company entered into several settlement agreements reducing existing obligations recorded in accounts payable and accrued liabilities. Since the events leading to the settlements were in existence at December 31, 2005, management considers the settlement Type 1 Subsequent Events pursuant to Statement on Auditing Standards No. 1, Section 560, requiring the impact of the settlements to be reflected as of the applicable balance sheet date to more ensure the financials are not misleading. The notes resulted in write-off of debt due to settlement of $38,496 and $197,761 during the years ended December 31, 2006 and 2005, respectively. Management and legal counsel also determined that the statute of limitations had expired on several liabilities or their collection was remote based on aging and lack of collection efforts by creditors. Based on AU 560, liabilities totaling $314,099 were also written off at December 31, 2005. To compensate for any creditors that may seek payment, the Company set up a reserve of approximately 25% of the remaining accounts payable and applicable accrued liabilities at December 31, 2005. The total reserve of $48,000 will be amortized quarterly to other income over 3 years commencing the first quarter of 2006. Debt written off during 2006 and 2005 totaled $54,496 (including $16,000 of reserve amortization) and $511,860, respectively. No debt was written off during the six months ended June 30, 2006 or 2005, but $4,000 of accounts payable reserve was amortized to other income during each of the quarters ended March and June 2006 and 2005. The restatement of the December 31, 2005 financial statements is disclosed in Note T filed with the 2006 Form 10-KSB filed with the SEC on May 18, 2007. The roll-forward of this restatement is disclosed in Note N to these financial statements.

Other:

On December 18, 2001 the Company entered into a short-term loan agreement with an investor for $120,000. Principal and interest on the loan were due April 15, 2002. The loan was secured by approximately 3.4 million shares of the Company’s stock owned and pledged by the Company’s Chairman. On May 17, 2002, the investor filed suit against the Company and the Company’s Chairman for the principal, accrued interest, legal fees and related damages. A liability in the amount of the principal, interest and legal fees was recorded in the balance sheet of the Company. The Company issued the Company’s Chairman 3,272,727 shares of common stock in August 2002 to replace the pledged stock lost. The reimbursed shares were treated as a cost of capital and approximately $52,000 was applied against the paid-in-capital account in the equity section of the Company’s balance sheet. This liability was reduced by the receipt of the pledged shares and has a current balance of approximately $57,000 at December 31, 2005 and June 30, 2006 and is recorded in accounts payable and accrued expenses.

During 2002, the Company entered into several stock purchase agreements with Hickey Hill Partners LLC and Miami Associates Investors, LLC ("Investors") to purchase shares of the Company’s common stock. The Company discounted the purchase price based upon market conditions at the time of issuance of the stock and the immediately following several days. The Company held advances in the amount of $35,000 for which stock was not issued. The Company believed that the investors defaulted on the stock purchase agreements and the investors believed that the Company defaulted on the stock purchase agreements. Hickey Hill Partners LLC filed a lawsuit against the Company and the Company’s former Chairman in the Circuit Court of the 15th Judicial Circuit in and for Palm Beach County, Florida. On April 3, 2003, the court issued a default judgment against the Company and its former Chairman in the amount of $64,352 that bears interest at the rate of 6% a year and prejudgment interest of $1,716. The Company recorded a liability for the judgment and additional accrued interest at December 31, 2003 in the amount of $68,945 that is included in accounts payable and accrued expenses. In March 2005, the Company entered into an agreement to pay $45,000 to Hickey Hill Partners, LLC by May 15, 2005 in full satisfaction of all outstanding, current and pending claims regarding this judgment. The balance was paid in full on May 25, 2006, resulting in a $0 liability as of June 30, 2006.

Miami Associates Investors, LLC also filed a lawsuit against the Company and the Company’s Chairman in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida for damages in the amount of $54,850 together with the awarding of treble damages, attorneys fees and interest. On April 24, 2003, the court determined that the Company and our Chairman defaulted. A final judgment was ordered and finalized on December 3, 2003. The Company recorded a liability for the judgment and accrued interest at December 31, 2003 in the amount of $118,350 that is recorded in accounts payable and accrued expenses. In March 2005, the Company entered into an agreement to pay $55,000 to Miami Associates Investors, LLC by April 15, 2005 in full satisfaction of all outstanding, current and pending claims regarding this litigation. The reduced settlement was not paid in full when due, so additional fees and interest were charged. As of June 30, 2006, the balance remaining was approximately $34,000.

J. COMMITMENTS AND CONTINGENCIES

Commitments:

In November 2003, the Company entered into an exclusive distribution agreement for the sale of QoVox products in the Pacific Rim. The agreement has an effective date of January 1, 2004 and a term of four years, ending December 31, 2007. Under the distribution agreement, QoVox is required to provide training, marketing and technical support during the term of the agreement and provide product warranty and carry product liability insurance for any sold products. As of June 30, 2006, no products have been sold under this agreement.

On May 1, 2005, the Company entered into a Consulting Agreement with Mr. Andrew Benson under which Mr. Benson furnishes consulting and general business advisory services relating to the operation of our business and the business of our subsidiaries and affiliates. The consulting agreement is for a period of twelve months ending on April 30, 2006 and requires monthly payments of $12,500 and cannot be revoked, terminated or cancelled by the Company except with respect to a termination for cause. The Company subsequently agreed with Mr. Benson in April, 2006 to terminate this agreement and $100,000 of accrued compensation was cancelled.

On May 13, 2005, the Company entered into a Mutual General Release with Yes International, Inc. settling any and all claims either company may have had. The terms of the release provided that the Company pay Yes International $5,000 per month beginning in May for five months for a total of $25,000. The Company made its first payment of $5,000 on May 31, 2005 and has subsequently made $3,500 of additional payments. The Company is in default with respect to this agreement.

On July 1, 2005, we appointed Joshua E. Davidson to the position of Vice President, Finance. Effective as of July 1, 2005, Datameg and Mr. Davidson entered into a letter agreement, under which the Company agreed to pay to Mr. Davidson $700 per day (or $350 per half day) that he performs services for Datameg. On December 29, 2005 we amended the contract with Mr. Davidson changing the rate of pay to $75 per hour. In connection with his appointment as Vice President, Finance, Datameg granted to Mr. Davidson a one-time signing bonus of one million restricted shares of Datameg common stock, of which 50% (500,000 shares) were issued in 2005 and the remaining 50% (500,000 shares) vested on January 3, 2006, but remained unissued at June 30, 2006. On July 28, 2006, Mr. Davidson resigned his position and filed suit in Boston municipal court claiming $14,900 in additional compensation. The Company has denied his claim and has counter claimed for damages.

On July 25, 2005, we entered into an Option Agreement with Mark P. McGrath, our then Chairman, Chief Executive Officer and President, under which we granted a non-qualified stock option to acquire 2,500,000 shares of our common stock to Mr. McGrath. Also on July 25, 2005, we entered into a substantially identical Option Agreement with Joshua E. Davidson under which we granted a non-qualified stock option to acquire 2,500,000 shares of our common stock to Mr. Davidson. Each option (a) carries an exercise price of $0.06 per share (subject to adjustment for stock splits, stock dividends, reverse splits and the like), (b) becomes exercisable (vests) as to 500,000 shares on the first business day of each of the next five calendar quarters, beginning on October 3, 2005 and ending on October 2, 2006 and (c) has an expiration date of July 25, 2010. Mr. McGrath resigned from the Company on December 29, 2005 and his non-qualified stock option to acquire 2,500,000 shares lapsed on March 29, 2006. Mr. Davidson resigned from the Company effective August 4, 2006 and his non-qualified stock option to acquire 2,500,000 shares lapsed on November 4, 2006.

On December 29, 2005, James Murphy was appointed Chairman of the Board of Directors, Chief Executive Officer and President of the Company. Mr. Murphy’s compensation consists of: an annual salary of $150,000; stock options to purchase 2,500,000 shares of common stock of the Company at $.10 per share, subject to vesting as approved by the Board of Directors; standard Company benefits; and an annual discretionary bonus up to 75% of annual salary depending on his contribution to the Company and the Company’s commercial success, as determined by the Board of Directors. The stock options to purchase 2,500,000 shares were awarded on January 15, 2006 with immediate vesting.

On March 9, 2006, the Company entered into a contract with Robert B. Nelson appointing him Vice President, Worldwide Sales, for QoVox, Inc. Mr. Nelson’s compensation is comprised of a base salary with incentives for reaching specific gross sales and field trial goals and options to purchase 50,000 shares of the Company’s unregistered stock. The stock options to purchase 50,000 shares have not been issued and no compensation was paid by June 30, 2006.

On March 13, 2006, the Company entered into a contract with Michael West appointing him Senior Vice President, National Accounts, for QoVox, Inc. Mr. West’s compensation is comprised of a base salary with incentives for reaching specific sales goals; a stock grant of 1,000,000 shares of the Company’s unregistered stock, with 500,000 shares due upon execution of Mr. West’s contract and 500,000 shares due upon the Company’s receipt of new revenue. The initial stock grant of 500,000 shares has been issued and no compensation was paid by June 30, 2006.

On March 13, 2006, the Company terminated its Sales Representation Agreement with Omni Solutions, Inc. by entering into a mutual settlement and release agreement. Omni Solutions, Inc. acknowledged receipt of 12,000,000 common shares together with $87,000 of previously accrued liabilities payable in 6 equal monthly installments in full satisfaction of amounts due under the Sales Representation Agreement that was included with accounts payable and accrued expenses at December 31, 2005.

On April 20, 2006, Former Director and Chief Executive Andrew Benson canceled his option agreement dated January 1, 2004 for 5 million common shares and forgave any and all cash owed to him under his consulting agreement and otherwise by Datameg Corporation in exchange for Datameg Corporation amending the exercise price from $.17 to $.10 for his remaining option agreement dated April 17, 2005 for 10 million shares. The Board of Directors so agreed.

On April 20, 2006, Director Neil Gordon reduced his option shares from 1,500,000 common shares at an exercise price of $.08 per share to 750,000 common shares at an exercise price of $.04 per share under the terms of his option agreement dated September 22, 2005 for his service as a director. The Board of Directors so agreed. No incremental compensation was noted due to the revision of the terms of the option agreement, as the fair value of the revised agreement was only nominally different than the original at the date of modification.

Lease commitments:

In October 2004, QoVox signed a lease agreement for office space in Raleigh, North Carolina. The term of the lease is for 37 months beginning December 2004 and ending in January 2008. The terms of the lease call for monthly payments of approximately $5,000.

The Company leases communications equipment and owes $8,302 under capital lease agreements, which expired in 2001. These capital leases have been in default, and due to the age of the obligations and the remote likelihood that they would be called, were written off at December 31, 2005. The restatement of the December 31, 2005 financial statements is disclosed in Note T filed with the 2006 Form 10-KSB filed with the SEC on May 18, 2007. The roll-forward of this restatement is disclosed in Note N to these financial statements. The assets under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. The assets are amortized over their estimated useful lives. Amortization of assets under capital leases is included in depreciation and amortization expense.

Contingencies:

During 1999, the Company entered into an agreement with a consulting firm for services rendered over the period October 1999 through June 2000. The agreement with the consultant may call for additional consideration totaling 4% of outstanding stock in warrants or warrants for 1,320,000 shares of the Company’s common stock at a strike price of $2.30 per share, contingent upon the consummation of the share exchange. The Company performed an analysis of the value of the warrants to determine the amount of a possible expense under SFAS No. 123. Using the Black-Scholes model, if the warrants had been issued, when the agreement was signed, they would have been valued at approximately $704,000. The Company believes that no such additional compensation is due to the consultant under the terms of the agreement. No amount has been recorded related to the possible requirements to issue warrants.

As of December 31, 2002, the Company owed $142,388 to an investor pursuant to a judgment received related to a stock sale agreement. Pursuant to agreements with the investor, during 2003 the Company issued 10 million shares of the Company’s common stock to the investor and received an additional $200,000 from the investor. The investor released the judgment and there were no remaining amounts due to the investor related to this transaction at December 31, 2003. If the investor sells the 10 million shares of common stock for an amount in excess of $2,400,000, then the Company is entitled to receive 90% of the excess as additional proceeds. No amounts have been recorded related to the additional proceeds.

During 2002, the Company received a $25,000 premium in exchange for a warrant to purchase 5 million shares of the Company’s common stock. The holder exercised the warrant during 2003 in exchange for a contingent exercise price. Due to certain conditions, no amounts had to be paid against the contingent exercise price. Pursuant to the warrant agreement, the Company may be required to refund 110% of the warrant premium. No amount has been recorded against this contingent liability.

On April 27, 2005, the Company entered into a Mutual General Release with Andrew Benson whereby each of the Company and Mr. Benson agreed to unconditionally and completely release and discharge the other party (and his or its respective past, present, and future employees, officers, directors, agents, attorneys, representatives, affiliates, predecessors, heirs, successors and assigns) of and from all debts, actions, causes of action, agreements, obligations and liabilities. As a result of this agreement, contingent payroll tax liabilities previously indemnified by the former Chairman have become the contingent liabilities of the Company. The range of projected loss related to these contingent liabilities cannot be estimated at this time. Chief outside legal counsel has advised the Company that it is his opinion that said Mutual General Release is voidable as to Mr. Benson but the matter would be an issue determined in any court action.

On July 25, 2005, we entered into a Restricted Stock Agreement with William J. Mortimer, the then General Manager of the Company’s wholly-owned subsidiary, QoVox Corporation. Pursuant to the Restricted Stock Agreement, Mr. Mortimer purchased 12,000,000 shares of our common stock for a purchase price of $0.006 per share. These shares were issued in October 2005. Mr. Mortimer paid for those shares by forgoing receipt of consulting fees to which he was otherwise entitled under the agreement. We have a right to repurchase these shares at the original purchase price, in the event that Mr. Mortimer ceases to serve as a full-time employee or consultant to QoVox prior to achieving each respective vesting milestone. On December 12, 2005, Mr. Mortimer resigned his position as General Manager. Effective December 29, 2005 Mr. Mortimer resigned as a director of the Company.

A stock certificate for 12,000,000 restricted shares, which was according to his agreement to be held in escrow, was inadvertently issued to Mr. Mortimer. Approximately $151,000 was expensed during the quarter ended September 30, 2005 based on estimated vesting milestones. The Company and Mr. Mortimer disagreed as to what portion of the 12 million shares vested and what portion should be returned to the Company at the price paid by Mr. Mortimer. Since the Company issued the shares to Mr. Mortimer and since no further consulting services were received, the Company expensed the remaining compensation value of the shares of approximately $410,000 during the quarter ended December 31, 2005, representing total compensation value expensed at approximately $560,000. On June 23, 2006, the Company entered into an agreement with Mr. Mortimer that 2 million shares have vested and 10 million shares shall be returned at no cost, thereby resulting in a reversal of $466,667, which was recorded during the third quarter of 2006. Management has determined to restate its December 31, 2005 financial statements, and subsequent interim filings, to record the net transaction during 2005 pursuant to AU560, as it more accurately reflects the substance of the transactions. The restatement of the December 31, 2005 financial statements is disclosed in Note T filed with the 2006 Form 10-KSB filed with the SEC on May 18, 2007. The roll-forward of this restatement is disclosed in Note N to these financial statements.

In some of its former standard Stock Purchase Agreements, the Company granted some purchasers stock registration rights including a 2% monthly penalty for delayed registration, payable in additional shares. As of June 30, 2006, the Company has not met some of the registration requirements. While the Company intends to proceed with registration, we believe that the penalty is against Massachusetts’ public policy and is not payable or enforceable. If our belief is incorrect, the estimated loss will consist of the issuance of approximately 2,006,189 additional shares.

K. STOCK SUBSCRIPTION RECEIVABLE

On March 5, 2004, the Company entered into a stock subscription agreement with a foreign investor (the Investor) to purchase 2,941,176 shares of the Company’s common stock at a purchase price of $0.17 per share. On April 1, 2004, the investor made an initial subscription payment of $80,000 and the Company issued and delivered the full 2,941,176 shares of restricted Common Stock to the Investor with the understanding that the Investor was sending the Company the $420,000 balance and a stock subscription receivable was duly recorded on the Company’s books in the amount of $420,000. On April 14, 2004, the Investor notified the Company of the Investor’s intent not to invest further in the Company. The Company offered to issue a new stock certificate in the amount of 470,588 shares to accommodate the $80,000 initial subscription payment in exchange for the Investor’s return of the stock certificate issued and delivered to the Investor on April 1, 2004 for the full share amount of 2,941,176 shares. The Investor refused the Company’s exchange offer and has continued to refuse to return the stock certificate for 2,941,176 shares.

L. NET LOSS PER COMMON SHARE

As required by SFAS No. 128, the following is a reconciliation of the basic and diluted EPS calculations for the periods presented:

	For the Three Months Ended June 30, 2005	For the Three Months Ended June 30, 2005	For the Six Months Ended June 30, 2005	For the Six Months Ended June 30, 2006
Net Loss (numerator)	$ (1,861,841)	$ (208,764)	$ (3,032,322)	$ (857,406)
Weighted Average Shares (denominator)	296,961,011	330,813,359	296,961,011	330,813,359
Basic and diluted net loss per commons share	$(0.01)	$(0.00)	$(0.01)	$(0.00)

As required by the Securities and Exchange Commission Staff Accounting Bulletin No. 98, the above calculation of EPS is based on SFAS No. 128, "Earnings Per Share." Thus, options and warrants granted as of June 30, 2006 and 2005 are not included in the calculation of diluted EPS as their inclusion would be anti-dilutive.

M. OPERATING LOSSES

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has sustained substantial costs in implementing its action plan. In addition, the Company used substantial amounts of working capital in funding these costs. At June 30, 2006, current liabilities exceeded current assets by $3,636,772. The Company is seeking to raise additional capital and develop partnerships and cooperative agreements. In view of these matters, the ability of the Company to continue as a going concern is dependent upon the Company’s ability to achieve its business objectives and the success of its future operations.

N. RESTATEMENT OF JUNE 30, 2006 FINANCIALS

On April 12, 2007, the Company was advised by its new independent accountant that certain matters in its audited consolidated financials contained in the Company’s Form 10-KSB for 2005 need to be restated. As a result, the Company advised that its Form 10-KSB for 2005 and subsequent interim reports in 2006 may not be relied upon. With the filing of the Company’s Form 10-KSB for 2006 and subsequent quarterly filings containing comparative interim financials from the preceding year, its reports may be relied upon.

The restated financials for the quarter ended June 30, 2006 are included in this Form 10-QSB/A. Details of the adjustments made to the Company’s December 31, 2005 financials are described in Note T of the 2006 Form 10-KSB. The affects of the restatement on the quarter ended June 30, 2006 are as follows:

		Unaudited	Roll Forward	6/30/2006	Additional	Additional	Unaudited
		Balance	of 12/31/05	Balances	3/31/2006	6/30/2006	Balance
	12/31/2005	6/30/2006	Restatement	Rolled	Restatement	Restatement	6/30/2006	Reference
Consolidated Balances	(Restated)	(Original)	Adjusments	Forward	Adjustments	Adjustments	(Restated)	#

Cash and cash equivalents	11,936	2,182		2,182			2,182
Accounts receivable	7,100			-			-
Inventory	159,788	152,478		152,478			152,478
Property, plant and equipment (net)	367	102,884	(91,351)	11,533	11,468	(23,001)	-	(1)
Goodwill	206,746	206,746		206,746			206,746
Prepaid and deferred expenses	27,187	392	26,000	26,392	(13,000)	(13,000)	392	(1)
Deposits	7,218	7,218		7,218			7,218
Accounts payable & accrued expenses	(2,689,909)	(2,570,029)	14,581	(2,555,448)	4,000	4,000	(2,634,169)	(2)
				-	(41,137)	(38,790)		(3)
					(6,794)			(3)
Deferred revenue	(7,344)	(9,705)		(9,705)			(9,705)
Due to related parties	(56,760)	(56,760)		(56,760)			(56,760)
Capital lease obligation		(8,302)	8,302	-			-
Convertible subordinated debentures		(20,000)	20,000	-			-
Convertible promissory notes	(267,949)	(51,138)	16,561	(34,577)	6,794		(27,783)	(3)
Notes payable - current	(843,809)	(1,664,006)	521,064	(1,142,942)	41,137	38,790	(1,063,015)	(3)
Minority interest	67,939	67,939		67,939			67,939
Common stock	(32,046)	(34,081)	1,000	(33,081)			(33,081)
APIC	(30,211,296)	(30,676,874)	63,367	(30,613,507)	(682,663)	(23)	(31,296,193)	(4)
Stock subscriptions receivable	420,056	469,556	(49,500)	420,056			420,056
Stock to be issued	(375,763)	(756,436)	(96,500)	(852,936)	682,663	23	(170,250)	(4)
Accumulated deficit	27,470,035	34,661,173	(433,524)	34,227,649	13,000		34,225,181
					(11,468)
					(4,000)
Net loss	6,106,504	176,763		176,763		13,000	208,764	(1)
						23,001		(1)
						(4,000)		(2)
Total	-	-	-	-	-	-	-

1) During 2005, the Company capitalized certain software licensed as intangible assets (reported with net property, plant and equipment) it had planned to amortize over three years. Upon further review of the license agreement, management determined that the proper accounting treatment was to expense these costs. Accordingly, the intangible asset was reclassified to expense or deferred expenses during 2005. The deferred expense represents invoices received for use of the software over the subsequent year. The Company ratably amortizes the deferred expense to license expense, resulting in amortization of $13,000 for each of the quarters ended March 31 and June 30, 2006. To correct the timing effects of the December 31, 2005 and March 31, 2006 adjustments made to remove the capitalized software and its related accumulated amortization, and zero out property and equipment (remaining property and equipment were fully depreciated), amortization of $11,468 was reversed during the quarter ended March 31, 2006, and amortization of $23,001 was recorded during the quarter ended June 30, 2006.




(2) As disclosed in Note M to the financials included in the March 2007 Form 10-QSB filed with the SEC on May 21, 2007, the Company wrote off a significant amount of debt during the fourth quarters of 2006 and 2005. To allow for possible collections by creditors in the future, the Company set up a reserve it plans to amortize over three years to other income. Amortization to other income totaled $4,000 for each of the quarters ended March 31 and June 30, 2006.



(3) These items are not restatements, rather the reclassification of accrued interest from the notes payable accounts to accrued expenses to conform to current period presentation.


(4) As part of the December 31, 2005 restatement, the Company adjusted for deposits received for stock subsequently issued during the first and second quarters of 2006. It was necessary to reverse these items upon the issuance of the stock by reclassifying them from the Stock to be Issued account to Additional Paid-In Capital.

O. SUBSEQUENT EVENTS

On July 14, 2006, the foregoing agreements were amended:

The option agreement dated January 1, 2004 granting Mr. Benson the right to exercise 5 million options to purchase a like number of Datameg common shares is revived in all terms and conditions, except that the option exercise price is reduced from $.20 per share to $.05 per share.
The option agreement dated April 17, 2005 granting Andrew Benson the right to exercise 10 million options to purchase a like number of Datameg common shares is canceled and said option agreement shall be destroyed by Datameg Corporation. The Board of Directors so agreed.

On July 12, 2006, Investment banker Byron J. Collier, was appointed to the Advisory Board of Datameg Corporation by CEO James Murphy.

On July 21, 2006, the Company (Obligor) signed a settlement and mutual release and promissory note with the law firm of Gibson, Dunn & Crutcher (Holder). Obligor shall pay Holder the principal sum of $155,000 plus interest at the Stated Interest Rate as follows: $10,000.00 on or before December 1, 2006, $15,000.00 on or before March 15, 2007, $10,000.00 on or before June 15, 2007, $10,000.00 on or before September 15, 2007, $10,000.00 on or before December 15, 2007, $10,000.00 on or before March 15, 2008, $10,000.00 on or before June 15, 2008, $10,000.00 on or before September 15, 2008, $10,000.00 on or before December 15, 2008, $10,000.00 on or before March 15, 2009, and $50,000.00 plus all accrued and unpaid interest on or before June 15, 2009. Notwithstanding the payment schedule in the preceding sentence, Holder agrees to waive all accrued and unpaid interest if Obligor pays the sum of $155,000.00 by December 1, 2007. The balance on the promissory note accrues interest at a rate of 6% per annum.

Having received and considered a report by outside legal counsel on July 31, 2006, the Board of Directors of Datameg Corporation directed outside legal counsel to affect the move of the principal office of the Company from Massachusetts to Utah on or before September 29, 2006.

On August 2, 2006, Former Director and Chief Executive Mark P. McGrath canceled his option agreement dated April 17, 2005 for 5 million shares.

On August 3, 2006, the Company dismissed Fitzgerald, Snyder & Co., P.C. ("Fitzgerald, Snyder") as the Company’s independent registered public accounting firm and engaged Child, Van Wagoner & Bradshaw, PLLC ("CVB") as its new independent registered public accounting firm for FY 2006.

On April 12, 2007, the Company was advised by its new independent accountant that certain matters in its audited consolidated financials contained in the Company’s Form 10KSB for 2005 needed to be restated. As a result, the Company advised that its Form 10KSB for 2005 and subsequent interim reports in 2006 may not be relied upon. With the filing of the Company’s Form 10KSB for 2006 and subsequent quarterly filings containing comparative interim financials from the preceding year, its reports may be relied upon.

On January 23, 2007, QoVox Corporation, a wholly owned subsidiary of Datameg Corporation (OTCBB:DTMG), announced the hiring of Mr. Jay Stewart as Chief Technology Officer. During the 2^nd quarter of 2007, Mr. Stewart resigned his position with QoVox., forfeiting his options to purchase Datameg Corporation common shares.

On June 12, 2007, Datameg Corporation, a Delaware corporation (the "Parent" or "Datameg"), C.Com Acquisition Corp., a Massachusetts corporation and a wholly-owned subsidiary of Datameg ("Sub"), Computer Ctr.Com, Inc., a Massachusetts corporation ("Company"), and the holders of capital stock of the Company (the "Principal Shareholders") with respect to certain provisions only, entered into an Agreement and Plan of Merger (the "Merger Agreement"). The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, Sub will be merged with and into the Company (the "Merger"), with Company continuing after the Merger as the surviving corporation and a wholly-owned subsidiary of Datameg.

On August 15, 2007, Datameg Corporation, a Delaware corporation (the "Parent" or "Datameg"), AM Acquisition Corporation., a Massachusetts corporation and a wholly-owned subsidiary of Datameg ("Sub"), American Marketing & Sales, Inc., a Massachusetts corporation ("Company"), and the holders of capital stock of the Company (the "Principal Shareholders") with respect to certain provisions only, entered into an Agreement and Plan of Merger (the "Merger Agreement"). The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, Sub will be merged with and into the Company (the "Merger"), with Company continuing after the Merger as the surviving corporation and a wholly-owned subsidiary of Datameg.

Item 2. Plan of Operation
Plan of Operation

We are a development-stage technology company focused on providing service assurance systems products and services for network operators in the telecommunications industry. Our target customers are telecom operators and cable operators worldwide. We focus specifically on voice services over traditional circuit-switched and managed IP networks.

Through our wholly-owned subsidiary, QoVox Corporation, we design, develop and sell an active voice quality test system, capable of monitoring and providing analytical/statistical data that characterizes the connectivity and measurement of voice quality across communications networks. We are working on tools and techniques for network-wide fault identification, isolation and troubleshooting.

Communication service providers, such as telecom operators and cable operators, are challenged to deliver high-quality voice services, at the lowest cost, over managed IP infrastructures and interworking with traditional circuit-switched networks. To do this effectively, service providers must monitor and measure their voice service offering, proactively detect problems and resolve them quickly and cost-effectively, ideally before their customers experience any problem or service degradation. Additionally, if customers do report service problems, operators must be able to effectively identify the cause and fix the problem. QoVox provides the systems (products) and services to address these challenges.

VoIP Market

VoIP is one of the fastest growing segments in the telecommunications sector. Yankee Group and IDG, leading market research firms, estimate the growth of VoIP subscribers. Yankee Group estimated VoIP subscribers would grow from one million at the end of 2004 to 18 million by 2008. IDC reported the number of VoIP subscribers in the U.S. will jump from three million in 2005 to 27 million in 2009.

VoIP service providers include local and long distance telephone companies, such as SBC, Verizon, Bellsouth, Qwest, Sprint, AT&T, MCI and others; cable multi-service operators (MSOs) such as Cablevision, Comcast, Cox, Rogers, Time Warner Cable and others; and emerging service providers, such as Vonage and others.

In November 2004, Frost & Sullivan reported the VoIP Monitoring market in 2004 was $50 million. By 2008, the VoIP Monitoring market is forecasted to reach $297 million, representing a 56% compounded annual growth rate from 2004 through 2008.

Business Challenge Driving Demand for New Tools and Services

Enterprise and residential customers expect and demand that their voice services are high quality and are offered at the lowest possible cost. To meet these expectations, communication service providers must save significant capital costs and operating expenses through deploying and operating next generation networks. These next generation networks utilize packet switching technology that is different from the traditional circuit-switched networks. Some service operators expect to save between 40% to 50% of their capital and operating expenditures.

Service providers are deploying and operating these next generation networks today, often interworking with traditional circuit-switched networks. Service providers need tools and services, like those QoVox offers, to report statistically and analytically the performance of their service and to isolate, diagnose and fix problems. Many service providers who have limited experience in managing these emerging networking technologies are focused today on deployment and need help to report on the service performance and to identify and troubleshoot problems. To deploy and operate these networks and services, service providers must buy tools and develop new expertise to deploy, operate and manage these new networks and services. This is the business opportunity that QoVox targets.

We believe the QoVox systems and services enable service providers to proactively depict their voice services and to detect and pinpoint network problems. These problems may be repaired effectively; thus, minimizing the number and extent of incidences of customers experiencing loss of service or poor voice quality.

Business Objectives

We expect to be among the global leaders in developing and selling systems and services for service assurance of next generation networks and services.

Our goal is to be the leading supplier of active voice quality test systems within two years. Thus, we have an immediate business focus on winning deals, installing our systems and delivering our services. There are three important elements to achieve this:

•

We need to commercialize our services offerings.

•

We need to build our sales and support channel.

•

We need to expand our R&D capability to further enhance the current product family.

We plan to continue to design, build and offer additional, innovative products and other important services to address business opportunities associated with the deployment and management of next generation networks and services. We see this specifically in the areas of fault isolation and troubleshooting, security and revenue assurance. Additionally, we intend to extend beyond VoIP, into other emerging technologies, like video over IP, IPTV, and other multimedia services.

Current Situation

QoVox’s Network Assurance System, consisting of hardware and software, actively makes calls between various points across communication networks and correlates and reports the results of these call campaigns on a centralized server. We can operate the system on behalf of our customers, or our customer can operate the system.

We commenced sales of the Network Assurance System in the second quarter of 2004, shipped the first evaluation system on July 29, 2004, and received our first revenue in December 2004.

We have been conducting one field trial with Time Warner Cable, a large cable operator and another with Sprint, a large telecom operator. Our products are installed in multiple points throughout their networks and we have been actively characterizing the connectivity and measuring the voice quality across portions of these networks. These field trials have convinced us we have a differentiated product capability and value-added services offerings. These differentiators are: we provide a combination of hardware, software and services; we provide active 24/7 monitoring and testing, other competitors provide only passive testing when there is a report of voice quality or call failure; we can integrate across both the current Public Switched Telephone Network (PSTN) and the next generation network or VoIP; and we can replicate call testing. QoVox views the services capabilities it plans to develop as a significant value-add to customers and a significant potential enhancement to our revenue model.

QoVox has its office in Raleigh, North Carolina. At present, QoVox has two in-house sales representatives.

Following the validation of our products and services in these field trials, QoVox plans to commence the development of the global marketing, sales and support infrastructure of the Company.

Additionally, to satisfactorily meet customer expectations and to successfully capitalize on the business opportunities, QoVox must also add people and develop the infrastructure for research, product development and service operations.

Business Strategy and Direction

QoVox intends to develop and sell systems products and services.

QoVox intends to continue to target telecom operators and cable operators.

QoVox plans to develop its business first in the U.S. and Canada, and then extend into Asia and Europe.

QoVox plans to continue providing solutions for the challenges related to deploying and operating voice services, especially in the areas of quality and security. QoVox plans to extend its capability into fault isolation and troubleshooting. Additionally, QoVox plans to make contributions for other emerging technologies, such as video over IP.

QoVox will pursue the following strategy to achieve our business objectives:

	•		Provide tools and systems to manage the quality of service and security of next generation networks and services;
	•		Develop, partner and acquire technologies to offer the broadest suite of integrated tools and systems for monitoring and providing analytical/statistical data that characterizing service performance, isolating and diagnosing problems and optimizing performance.

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Develop and offer the services to characterize network and service health and to isolate and diagnose performance and security problems.

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Work very closely with leading network equipment manufacturers to build tools specific for the deployment and operation of network equipment from these leading vendors.

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Create a consultative sales and support organization in both our direct and channel sales initiatives.

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Partner with selected system integrators to facilitate the easy installation and customization of QoVox system into the customers’ operating environment and workflow. In addition, system integrators are expected to be a source of leads, referrals and support our sales efforts.

Product Development

QoVox has products and services that help service providers deploy and manage voice services.

Our products are deployed throughout the service providers’ networks. Our products check that calls can be connected properly across these networks and measure the voice quality between various points in the network.

QoVox’s flagship product, the Network Assurance System, is comprised of an array of Network Access Probes (called NAPs), that are distributed throughout a customer’s communication network, and a Central Server, that controls and receives information from the distributed Network Access Probes. The Network Access Probes autonomously originate and terminate telephone calls and perform various tests and measurements across the network. QoVox’s central server is a proprietary network data acquisition system that continuously collects and compiles the results of the Network Access Probe activities. When network faults are detected, the QoVox system alerts our field engineers (when we provide extended services) or the customer’s network operator.

Our product development initiatives focus on fault isolation and reporting and alerting methodologies. We believe our existing product and operational experience enable us to be among the leaders in the field of fault isolation and troubleshooting.

We expect to expand the range of Network Access Probe types and functions as needed to enable sales in new markets.

We will continue to develop new products and to enhance and maintain existing products. The new products will be in the following areas of interest and opportunity:

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Fault Isolation and Troubleshooting

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Security

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Performance Optimization

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Revenue Assurance

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Routing Management

Services Offering

At present, QoVox operates a Network Operations Center in Raleigh, NC, for a small number of network operators.

QoVox plans to provide and sell value-added services to operate customers’ network and service management systems for a subscription fee on an ongoing basis. On an agreed periodic schedule, QoVox will execute a test campaign, collect and analyze the test results and will produce a test report characterizing the network and service health. QoVox will identify and diagnose detected functional or performance problems.

Marketing and Sales

QoVox plans to develop a global sales and support channel, comprised of:

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direct QoVox sales representatives, sales engineers and support specialists;

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a network of specialized manufacturer representatives (MR) and value-added distributors; and

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a small number of operational support system vendors, equipment manufacturers and system integrators who will provide referrals or resell the QoVox products and services.

In the next two years, QoVox expects to fully develop its sales and support channel:

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in the U.S. and Canada, covering Tier 1 and Tier 2 wireline and mobile telecom operators and the Top 25 cable operators;

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in western and eastern Europe; and

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in Japan, China, Korea and India.

In the subsequent years, QoVox expects to develop the sales and support channel:

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in South and Central America, with an emphasis on Mexico and Brazil;

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across the rest of Asia; and

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in the Middle East and Africa;

QoVox plans to actively participate in international and regional industry forums and standardization bodies to build and earn a reputation as an innovative industry leader.

QoVox plans to organize and host regional Industry Leadership Forums, bringing together industry leaders to share experiences, to develop new tools and techniques, and to form joint research and develop projects.

QoVox plans to establish the QoVox Research Network (QRN) comprised of selected universities and industrial research organizations to guide, foster and fund research in new methodologies and techniques to manage these next generation networks and services.

Competition

There are a number of competitors in the VoIP Monitoring business. Agilent Technologies is the current market leader, as reported by Frost & Sullivan. We believe Agilent Technologies struggles to provide product enhancements but continues to capitalize on its early entry into this market. We believe that the eventual market leader is as of yet undetermined. Several suppliers are aggressively pursuing this business opportunity. Many competitors target the enterprise or large corporate customers; we target these as well as telecommunications service providers.

There are three elements of our competitive differentiation.

First, there are two basic techniques for monitoring the voice quality; many competitors have adopted passive techniques; we have adopted active techniques. We provide an active test solution. This means that we proactively and continuously make calls between various points in the networks. We can schedule and automate test campaigns that are repeated at specified time intervals to verify the connectivity and assess voice quality throughout the service providers’ network. In contrast, many of our competitors only provide passive test solutions, which monitor actual user traffic only. Passive voice quality techniques have the following disadvantages:

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They cannot replicate call scenarios or situations.

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They cannot compare test results for the same test campaigns run at different times.

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They can only detect a problem at the same time a user experiences the problem.

We believe service providers need solutions that combine the benefits of active and passive techniques for comprehensive service management. We know that service providers need active testing solutions to proactively detect problems, to thoroughly characterize their service offering to reliably verify the service has been fixed once a problem is isolated and to resolve and enhance customer services and the customer’s experience with this new form of telecommunications.

The second way we differentiate ourselves from many competitors is that we directly measure the voice service quality across traditional and next generation networks, according to the international standard (The International Telecommunication Union (ITU) standard for speech quality).

Finally, we offer both products and services. We believe at this time we are the only supplier to provide this combined offering in this market segment. We see a significant customer need to develop and utilize operational expertise in managing these next generation networks and services. We prepare performance reports, and we identify, isolate and troubleshoot problems on the behalf of or along side our service provider customers.

Short-Term Milestones

We have identified six milestones that we believe are important indications that we are on track to achieve our short-term business goals.

First, the sales cycle for these types of systems solutions is often 12-15 months, from the start of the vendor selection to the customer acceptance of the installed system. With the early phases of the two field trials completed, we are now seeking orders from these companies, as we work with them to plan their deployment and operation These contracts typically require systems to be deployed in numerous sites across the service providers’ network; therefore, the time to install the systems can be significant.

Second, we anticipate more field trials in various telecom and service providers throughout the industry and we expect this to increase once we have developed our sales channel. These are important evaluations and a critical phase in the sales cycle. If successful, they generally lead to the purchase and deployment of the system.

Third, over the next few months, we expect to commercialize our service offerings through the receipt of initial firm orders from Tier 2 cable VoIP providers.

Fourth, we are seeking additional funding sources. We intend to build out our marketing and sales organization and to extend our expertise into new system tools and system techniques for fault isolation and troubleshooting and for new technologies, like IPTV. We currently plan to raise additional capital to fund these initiatives.

Fifth, we plan to build our global sales and support organization. We plan to put in place teams of sales representatives and sales engineers. We expect to sign agreements with specialized manufacturer’s representatives and distributors worldwide. We will seek global reseller agreements with other leading solution providers and systems integrators.

Sixth, we want to build our market awareness. We want to create a greater industry presence. We have engaged in meetings and presentations with several market research analysts and journalists that cover the IP Telephony industry. These are organizations like the Yankee Group, Frost & Sullivan, OSS Observer and IDC, who analyze and report on trends in markets and technologies. These are important to technology companies as they publish reports and white papers that validate and differentiate solutions providers and they help companies gain traction with those who buy or recommend communication products and services. Their recommendations influence the buying decisions within the markets that they cover.

CasCommunications

We own 40% of CasCommunications, an inactive development stage entity. We do not expect CasCommunications to generate any revenue in 2006.

Recent Developments

On February 16, 2006, the Company announced that it has appointed Lehman Bros. Managing Director John T. Grady Jr. to its Board of Directors.

February 27, 2006, the Company announced that it has appointed Bob Nelson as Vice President, Worldwide Sales, for its QoVox subsidiary. Reporting to Jim Murphy, Chairman of Datameg, Nelson will be responsible for sales and marketing of QoVox's VoIP quality assurance technology suite to telecommunications service providers and enterprise customers.

On March 13, 2006, the Company announced that it has strengthened its sales team with the appointment of Michael West as Senior Vice President, National Accounts, for its QoVox subsidiary.

Liquidity and Capital Resources

Current cash on hand and projected cash on hand is inadequate to execute our plan of operation. We continue to seek additional financing through the offering and sale of our securities in order to satisfy our immediate and short-term cash needs. Given the losses incurred to date and the lack of substantial revenue generated, we have little or no access to conventional debt markets. Funding to support both short and mid-term requirements for product development and launch will be done through additional sale of shares and potentially, to a lesser extent, from working capital that might be generated from customer revenue in the future. However, until the Company’s products generate significant revenue from a customer, future cash flows cannot be meaningfully projected.

In the period April through June 2006, the Company entered into subscription agreements to issue shares of unregistered stock most with detachable warrants with approximately nine (9) investors in the amount of $160,500. Additional information is provided below in Item 5. These funds were used to fund operations during the second three months of 2006. There can be no assurance that we will be able to raise additional capital on acceptable terms or at all. If we are unable to raise additional capital, we would need to curtail or reduce some or all of our operations, and some or all of QoVox’s operations.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and equity 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. These estimates have a material impact on our financial statements.

Revenue Recognition

The Company derives revenue from three primary sources: (1) system hardware component sales revenue, (2) software license revenue and (3) services and maintenance and right to use revenue, which include support, maintenance, right to use fees and consulting. Revenue on system hardware component sales is recognized upon delivery to, and acceptance by the customer. Software license revenue recognition is substantially governed by the provisions of Statement of Position No. 97-2, "Software Revenue Recognition," ("SOP 97-2") issued by the American Institute of Certified Public Accountants. The Company exercises judgment and uses estimates in connection with the determination of the amount of software license and services revenue to be recognized in each accounting period. For software license arrangements that do not require significant modification or customization of the underlying software, the Company recognizes revenue when: (1) it enters into a legally binding arrangement with a customer for the license of software; (2) it delivers the products or performs the services; (3) customer payment is deemed fixed or determinable and free of contingencies or significant uncertainties (4) collection is probable and (5) vendor-specific objective evidence ("VSOE") of fair value exists to allocate the total fee among all delivered and undelivered elements in the arrangement.

Multiple Element Arrangements

The Company typically enters into arrangements with customers that include perpetual software licenses, system hardware, maintenance and right to use fees. Software licenses are sold on a per copy basis. Per copy licenses give customers the right to use a single copy of licensed software for exclusive use on the Company’s system hardware. Assuming all other revenue recognition criteria are met, license revenue is recognized upon delivery using the residual method in accordance with SOP No. 98-9. Under the residual method, the Company allocates and defers revenue for the undelivered elements, based on VSOE of fair value, and recognizes the difference between the total arrangement fee and the amount deferred for the undelivered elements as revenue. The determination of fair value of each undelivered element in multiple element arrangements is based on the price charged when the same element is sold separately. If sufficient evidence of fair value cannot be determined for any undelivered item, all revenue from the arrangement is deferred until VSOE of fair value can be established or until all elements of the arrangement have been delivered. If the only undelivered element is maintenance and technical support for which the Company cannot establish VSOE, the Company will recognize the entire arrangement fees ratably over the maintenance and support term.

System hardware is hardware that is installed at a customer site for the purpose of utilizing the licensed software and as such, does not qualify as a separately deliverable element. The timing of revenue recognition from the sale of system hardware is therefore dependent upon the recognition of revenue for the related software licenses.

Maintenance and right to use fees include updates (unspecified product upgrades and enhancements) on a when-and-if-available basis, telephone support and bug fixes or patches and maintenance of the systems hardware, which would include repairs or replacement as necessary. VSOE of fair value for maintenance and right to use fees is based upon stated annual renewal rates. Maintenance and right to use fees revenue is recognized ratably over the maintenance and right to use term.

Revenue Recognition Criteria

The Company defines revenue recognition criteria as follows:

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Persuasive Evidence of an Arrangement Exists. It is the Company’s customary practice to have a purchase order prior to recognizing revenue on an arrangement.

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Delivery has Occurred. The Company’s software and systems hardware are physically delivered and installed at its customer’s site. The Company considers delivery complete when the software and system hardware products have been installed and the testing phase completed. The Company defers all the revenue until the testing phase had been completed and the Company receives customer acceptance.

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The Vendor’s Fee is Fixed or Determinable. The Company’s customary payment terms are generally within 30 days after the invoice date.

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Collection is Probable. Due to a lack of customer history upon which a judgment could be made as to the collectability of a particular receivable, revenue is currently recognized upon receipt of payment assuming all other conditions of the sale have been met.

Cost of Revenue

Cost of revenue includes costs related to user license, systems hardware and maintenance and right to use fees revenue. Cost of user license revenue includes material, packaging, shipping and other production costs and third-party royalties. Cost of systems hardware includes the cost of goods sold and installation costs. Cost of maintenance and right to use fees and consulting fees include related personnel costs, and hardware repair costs. Third-party consultant fees are also included in cost of services.

Inventory

The Company’s inventory is stated at the lower of cost or market value. Cost is determined using the first-in, first-out method. Unusual losses resulting from lower of cost or market adjustments or losses on firm purchase commitments, if any, are disclosed, and if material, separately stated from cost of goods sold in the statement of operations.

Commitments and Contingencies

Commitments and contingencies are evaluated on an individual basis to determine the impact on current and future liabilities and assets. We make a determination as to whether such a liability or loss is reasonably possible, and we either estimate the amount of possible loss or liability or range of loss or liability. In rare cases, we are not able to determine the amount of such loss or liability or even a range of amounts in a way that would not be misleading. We may be unable to calculate a liability or loss if substantiated information is unavailable or the amount of the loss or liability depends significantly on future events.

In addition to evaluating estimates relating to the items discussed above, we also consider other estimates, including but not limited to, those related to software development costs, goodwill and identifiable intangible assets. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets, liabilities and equity that are not readily apparent from other sources. Actual results and outcomes could differ from these estimates and assumptions. An explanation of significant estimates and related judgments made in these areas are noted below. Since June 30, 2006, there have been no significant changes to our critical accounting policies.

Goodwill and Identifiable Intangible Assets

Goodwill represents the excess of cost over the fair value of net tangible and identifiable intangible assets of acquired companies. As a result of our acquisition of substantially all of the assets and certain of the liabilities of QoVox, the Company recorded approximately $207,000 of goodwill. In accordance with the provisions of SFAS No. 142, we no longer amortize goodwill. However, goodwill must be reviewed at least annually for impairment. We have elected to perform our annual review at the end of each fiscal year. If the carrying value of our goodwill were to exceed the fair value at some time in the future, we would be required to report goodwill impairment charges as an operating expense in our statement of operations. Whenever events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable, we must conduct an impairment assessment of its goodwill and identifiable intangible assets. Factors that could trigger an impairment review include:

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Significant underperformance relative to expected historical or projected future research and development and operating results;

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Significant changes in the manner of use of the acquired assets or the strategy for the overall business;

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Significant negative industry or economic trends; and

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When it appears that the carrying value of intangibles or goodwill might not be recoverable based on one or more of the above criteria, management will use projected discounted cash flow, independent valuation or other means to measure any impairment.

Software development costs

Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed," requires capitalization of certain software development costs subsequent to the establishment of technological feasibility and readiness of general release. In 2004, certain costs were incurred subsequent to the establishment of technological feasibility and prior to the readiness of general release. These expenses were immaterial in nature and in total and therefore not capitalized.

Fair value of financial instruments

The carrying value of cash, notes receivable, accounts payable and accrued expenses and notes payable approximate fair value because of the relatively short maturity of these instruments.

Share-Based Payment

The Company follows guidance provided in SFAS No. 123R, "Share-Based Payment," which requires companies to recognize expense for stock-based awards based on their estimated fair value on the grant date. The Company uses the fair value method of SFAS No. 123R to account for all stock options including those issued to employees.

Income Taxes

The Company, a C-corporation, accounts for income taxes under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The principal differences are net operating losses, start-up costs and the use of accelerated depreciation methods to calculate depreciation expense for income tax purposes.

Consolidation of Variable Interest Entities

In January 2003 and revised December 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities." This interpretation of Accounting Research Bulletin No. 51, "Consolidated Financial Statements," requires consolidation by business enterprises of variable interest entities, as defined, when certain conditions are met. Pursuant to FIN No. 46, the Company continues to consolidate CASCommunications, Inc.

Accounting for Convertible Notes

During 2004 the Company issued convertible debt securities with non-detachable and automatic conversion features. During 2005 the Company issued convertible debt securities with non-detachable and automatic conversion features and with detachable warrants. The note holders have the right to have the notes converted into a number of shares of the Company’s Common Stock at conversion prices ranging $0.033 to $0.12 per share. The conversion prices on all the convertible notes issued in 2004 and most issued in 2005 were "in the money" on the date of the agreement resulting in a beneficial conversion feature. The note proceeds are allocated to the warrants and the beneficial conversion feature based on the relative fair values. The Company computes the fair value of the warrants using a Black-Scholes model. The Company computes the fair value of the beneficial conversion feature and the warrants based on the intrinsic method that computes the difference between the conversion price and the fair market price of the Company’s stock on the date of the agreement. The Company records the fair value of the beneficial conversion feature as an increase to paid in capital and a debt discount. The debt discount is amortized over the period between the date of the agreement and the automatic conversion date. The amortized debt discount is recorded as interest expense.

Risk Factors
Business Risks

Early Stage Development Company; Profitability Uncertain. Since our inception, we have been principally engaged in product and business development activities for our network monitoring system. Our technology demonstration programs with certain IP telephony service providers, including Sprint and Time Warner Cable, confirm the QoVox Network Assurance System’s performance and value to the communications industry. We believe that our initial demonstration and evaluation programs with certain carriers support the performance and efficacy of our system and will result in long-term implementation agreements. However, we cannot assure you that commercial viability will be demonstrated for the QoVox Network Assurance Systems, or that other competitive network monitoring solutions will not be chosen as alternatives to our QoVox solutions. Should competitor products displace our products in the market, our prospects for profitability may not be realized.

History of Operating Losses. We have had a history of substantial operating losses since we commenced our current operations in January 1999. From 1999 to June 30, 2006, we generated less than $100,000 in total revenue. We have a cumulative net loss of approximately $34.4 million since inception through June 30, 2006. These losses are principally the result of our general and administrative costs, our research and development costs and adverse judgments in litigation to which we have been a party. As a result, our liabilities currently greatly exceed our assets. We expect our net losses to continue, and we do not know if or when we will reach profitability.

Dependence Upon Distributor Acceptance. Our sales for the foreseeable future are expected to come from Internet telephony service providers and telecommunications network equipment OEMs. We expect that carriers will integrate our product into services they offer to their aggregated subscriber base. We expect OEMs will incorporate the QoVox Network Assurance Systems into their products once QoVox’s Active Monitoring System becomes a network monitoring option. We cannot assure you that we will receive orders from our prospective distribution partners sufficient to provide cash from operations in amounts required to sustain profitable operations. Additionally, we can not assure you that our products will be adopted at the rate we forecast. Any decrease in the adoption rate could adversely affect our performance.

Sales and Distribution. We now have dedicated sales and marketing personnel. Our larger potential competitors have stronger brand name recognition and significant sales and marketing infrastructures.

Dependence on Key Employees. Our success will depend upon the successful recruitment and retention of highly skilled and experienced managerial, technical, marketing and financial personnel. The competition for such personnel is intense and our competitors will have substantially greater financing and other resources to offer such personnel. Therefore, we cannot assure you that we will successfully recruit and retain necessary personnel.

New Products. QoVox products and services are in development and are based upon our proprietary core technology for active network monitoring. We believe that our future success will depend on additional monitoring algorithms and equipment, and related services, and therefore, on our ability to develop and introduce additional variations on our core technology that provide measurable competitive performance and economic benefit compared to existing and future network monitoring alternatives.

Dependence on Product Requirements of Customers. Our success will depend significantly on our ability to develop and introduce, on a timely basis, advanced network assurance products and systems that meet the needs of our customers. If we are unable to design, develop and introduce competitive products on a timely basis, our results of operations will be adversely affected.

Competition. Our potential network access competitors include, but are not limited to, major network equipment manufacturers such as Agilent Technologies, Empirex, MinaCom, and Radcom. Our competitors may have substantially greater research and development, marketing, financial, technological, personnel and managerial resources than we.

Industry Risks. We depend on the willingness of telecommunications carriers and internet service providers to purchase our products and services. A slowdown in the telecommunication or networking industries would adversely affect our ability to find partners and prospective customers. Segments of the telecommunications industry have experienced significant business downturns characterized by decreased product demand, price erosion, work slowdowns and layoffs. Our operations may in the future experience substantial fluctuations as a consequence of general economic conditions affecting the timing of orders from major customers and other factors affecting capital spending.

Selling Price/Manufacturing Cost Reduction. We assume that our selling price per unit of product will be reduced over time as production is increased and target unit manufacturing costs are achieved. Selling price reduction and cost reductions are necessary to improve unit price-performance ratios and remain competitive. We cannot assure you that we will successfully achieve target cost goals. Furthermore, our product costs may not be competitive with other commercially available network monitoring technologies.

Management of Growth. Our further development, and our goal to transition into a profitable going-concern, will require additional management as well as improved operational and financial systems. In addition, to achieve broader market acceptance, we will need to expand our marketing and sales staff, our employee base and the scope of our operations, all of which will require additional personnel and associated costs. We cannot assure you that we will successfully manage such transition or the expansion of our operations, and our failure to do so could have an adverse effect on our Company. In general, our business plan calls for significant growth over the next five years. Our failure to manage our growth effectively could have a material adverse effect on our business, financial condition and operating results.

Technological Risks

Products Fail to Perform. We have operated our network demonstration systems on live client network conditions. We designed our technology to operate consistent with telephony standards, but we cannot assure you that our products will work uniformly over the entire range of network conditions. While our network monitoring tools are based on well-known and robust microelectronics components, we have limited commercial experience with our products. Accordingly, we lack information on maintenance and returns that might result from less than expected product performance.

Technological Obsolescence. Network monitoring and performance assurance technology is rapidly evolving and highly competitive. We cannot assure you that our research and product development efforts will remain up-to-date given research efforts and technological activities of others, including initiatives and activities of governments, major research facilities and other corporations, nearly all of which enjoy far greater resources than we do.

Intellectual Property Risks. We do not own any patents. We rely primarily on trade secret laws, copyright law, unfair competition law and confidentiality agreements to protect our intellectual property. Our lack of ownership of patents, together with the trend toward litigation regarding patent and other intellectual property rights in the telecommunications and networking industries, mean that litigation by third parties is a possibility. While we do not believe that any of our products infringe the valid intellectual property rights of third parties, we may be unaware of intellectual property rights of others that may cover some of our technology, products or services. Any litigation regarding patents or other intellectual property could be costly and time-consuming and could divert our management and key personnel from our business operations. The complexity of the technology involved and the uncertainty of intellectual property litigation increase these risks. Claims of intellectual property infringement might also require us to enter into costly royalty or license agreements. However, we may be unable to obtain royalty or license agreements on terms acceptable to us, or at all. In addition, third parties may infringe our intellectual property, and we may expend significant resources enforcing our rights or suffer competitive injury.

Regulatory Risks

Regulatory Environment. The regulatory environment for the telecommunications industry has been undergoing liberalization at varying paces and with differing objectives, and in certain markets has been subject to political interference. For the most part, we believe that there will be increasing motivation on the part of regulators to set the regulatory framework for rapid deployment and use of Next Generation Network services. While it is unlikely, we could face regulatory risks.

Financing Risks

Need for Additional Financing; Dilution. We must raise working capital from private and public sources and prospectively from corporate alliances to fund our operations to the point of being self-funding. Should we fail to raise the necessary funding at the levels planned, we may be required to scale back or cease operations. We will be required to seek additional financing in the future. We cannot assure you that adequate additional financing, on acceptable terms or at all, will be available when needed, or that future financing would not further dilute shareholders’ interests. In addition, as a result of our inability to generate sufficient cash flow, we have historically issued stock and options to our executives, employees and consultants in lieu of cash compensation. Additional dilution to our shareholders’ interests may occur.

Item 3. Controls and Procedures

(a) Disclosure Controls and Procedures

Our disclosure controls and procedures are effective.

(b) Internal Control Over Financial Reporting

During the course of the Company’s preparation of its 2004 financial statements, including the audit of those financial statements by the Company’s independent registered public accounting firm, five material weaknesses in the Company’s internal control over financial reporting were identified. These material weakness were (1) the lack of an independent audit committee, (2) the delay in recording financial transactions, which could result in inadvertent errors or omissions, (3) the lack of an organized system of document review, signing, retaining copies, and orderly filing, (4) the lack of a significant segregation of duties or review of financial transactions and (5) the lack of documentation of controls and accounting procedures. Although some improvements have been made, these material weaknesses still exist as of June 30, 2006.

In connection with the effectiveness of Section 404 of the Sarbanes Oxley Act as to small business issuers in 2006, the Company plans to hire a financial executive to design effective disclosure controls and procedures. The Company also plans to expand its Board of Directors, recruit independent directors, form an audit committee comprised solely of independent directors and otherwise remedy the material weaknesses and significant deficiencies in internal control over financial reporting that currently exist.

There was no change in our internal control over financial reporting identified in the connection with an evaluation thereof that occurred during the last fiscal quarter (or our fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

Item 1. Legal Proceedings

On October 29, 2001, the Company signed a confessed judgment promissory note with a law firm acknowledging monies owed amounting to $568,382, which had been previously accrued. The balance of the promissory note accrued interest at a rate of 9% and matured on December 31, 2001. On January 7, 2002, the Company received a notice of default relating to the Promissory Note and as of January 1, 2002 the outstanding balance was increased five percent (5%) and began to accrue interest at an annual rate of 15%. The balance including accrued interest and legal fees was approximately $969,000 and $1,013,800 as of December 31, 2005 and June 30, 2006, respectively.

During 2002, the Company entered into several stock purchase agreements with Hickey Hill Partners LLC and Miami Associates Investors, LLC ("Investors") to purchase shares of the Company’s common stock. The Company discounted the purchase price based upon market conditions at the time of issuance of the stock and the immediately following several days. The Company held advances in the amount of $35,000 for which stock was not issued. The Company believed that the investors defaulted on the stock purchase agreements and the investors believed that the Company defaulted on the stock purchase agreements. Hickey Hill Partners LLC filed a lawsuit against the Company and the Company’s former Chairman in the Circuit Court of the 15th Judicial Circuit in and for Palm Beach County, Florida. On April 3, 2003, the court issued a default judgment against the Company and its former Chairman in the amount of $64,352 that bears interest at the rate of 6% a year and prejudgment interest of $1,716. The Company recorded a liability for the judgment and additional accrued interest at December 31, 2003 in the amount of $68,945 that is included in accounts payable and accrued expenses. In March 2005, the Company entered into an agreement to pay $45,000 to Hickey Hill Partners, LLC by May 15, 2005 in full satisfaction of all outstanding, current and pending claims regarding this judgment. The reduced settlement was paid in full on May 25, 2006, resulting in a $0 liability as of June 30, 2006.

On July 31, 2006, the Company received a letter from counsel for Joshua E. Davidson, giving Mr. Davidson’s notice of termination as the Company Comptroller and Acting Chief Financial Officer. The letter further demands $17,500 to satisfy Mr. Davidson’s claims against the Company, with the potential for multiple damages for willful deceptive and unfair acts and practices if the matter proceeds to suit. On September 22, 2006, Mr. Davidson filed suit against the Company and the Company’s CEO, individually, in Boston municipal court for $14,900 and multiple damages. The Company obtained litigation counsel and on October 16, 2006, defendants filed their answers denying all Mr. Davidson’s claims with the Company filing counter claims against Mr. Davidson and asking for removal of the action to a court of increased jurisdiction.

On February 9, 2007, QoVox filed suit the United States District Court, East District of North Carolina, Western Division, No. 5:07CV00046BO against its former CEO and a team of Ohio software consultants and business entities, alleging as to some or all of them, among other things, breach of contract, conspiracy, fraud, conversion, violation of the North Carolina Trade Secrets Act. Defendants have retained counsel and appeared and their responses were due on April 13, 2007.

On February 15, 2007, Datameg received a letter from collection counsel for Merrill Communications LLC for electronic and paper printing work allegedly incurred in 2004 by past outside corporate counsel. Datameg has paid $41,490 and Merrill claims an additional $21,928.56. Datameg contends Merrill has been paid in full and that it is further entitled to reimbursement of $10,179 for over billing.

On March 14, 2007, Datameg received a letter from collection counsel for RR Donnelley for electronic and paper printing work allegedly incurred in 2005 by past outside corporate counsel. Donnelley claims it is owed $29,694.97. Datameg outside legal counsel has requested additional documentation necessary to evaluate Donnelley’s claim.

On March 14, 2007, QoVox was sued in the General District Court of Justice for $7,200 by Joseph L. Turgeon, a past consultant, concerning consulting fees alleged to be owed from March 2004. We have presented a settlement offer and are awaiting a response.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The disclosure requirements for this item have been disclosed in Item 2 of this report under the caption "Liquidity and Capital Resources" and are incorporated herein by reference. In addition, Item 5 below is incorporated herein by reference.

Item 3. Defaults Upon Senior Securities

On October 29, 2001, the Company signed a confessed judgment promissory note with a law firm acknowledging monies owed amounting to $568,382, which had been previously accrued. The balance of the promissory note accrued interest at a rate of 9% and matured on December 31, 2001. On January 7, 2002, the Company received a notice of default relating to the Promissory Note and as of January 1, 2002 the outstanding balance was increased five percent (5%) and began to accrue interest at an annual rate of 15%. The balance including accrued interest and legal fees was approximately $969,000 and $1,013,800 as of December 31, 2005 and June 30, 2006, respectively.

On December 18, 2001, the Company entered into a short-term loan agreement with an investor for $120,000. Principal and interest on the loan were due April 15, 2002. The loan was secured by approximately 3.4 million shares of the Company’s stock owned and pledged by the Company’s former Chairman. On May 17, 2002, the investor filed suit against the Company and the Company’s former Chairman for the principal, interest, legal fees and related damages. A liability in the amount of the principal, interest and legal fees was recorded in the balance sheet of the Company. The Company issued the Company’s former Chairman 3,272,727 shares of common stock in August 2002 to replace the pledged stock lost. The reimbursed shares were treated as a cost of capital and approximately $52,000 was applied against the paid-in-capital account in the equity section of the Company’s balance sheet. This liability was reduced by the receipt of the pledged shares and has a current balance of approximately $57,000 at December 31, 2005 and June 30, 2006 and is recorded in accounts payable and accrued expenses.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

During the second quarter of 2006 and from the end of said quarter to the date of filing of this report, we issued the following subscription agreements and associated warrants.

Date of Agreement	Number of Securities	Type of Securities	Cash Consideration	Price per Share	Attached Warrants	Warrant Strike Price	Warrant Expiration Date

04/04/06	444,444	Common	$20,000	0.045	111,111	$0.09	4/4/2008
04/05/06	142,257	Common	$5,000	0.035	35,564	$0.07	4/4/2008
04/10/06	888,888	Common	$40,000	0.045	222,222	$0.09	4/10/2008
04/11/06	100,000	Common	$5,000	0.05	25,000	$0.10	4/11/2008
04/20/06	500,000	Common	$25,000	0.05	125,000	$0.10	4/20/2008
05/17/06	500,000	Common	$10,000	0.02	0	-	-
05/18/06	500,000	Common	$20,000	0.04	0	-	-
05/27/06	285,714	Common	$10,000	0.035	71,429	$0.07	4/4/2008
6/12/2006	714,285	Common	$25,000	0.035	178,571	$0.07	4/4/2008
6/20/2006	14,285	Common	$500		0	-	-
Totals	4,089,873		$160,500		768,897
7/11/2006	80,000	Common	$2,000	0.025	20,000	$0.05	7/11/2008
7/11/2006	100,000	Common	$2,500	0.025	25,000	$0.05	7/11/2008
7/11/2006	100,000	Common	$2,500	0.025	25,000	$0.05	7/11/2008
7/11/2006	500,000	Common	$10,000	0.02	0	-	-
7/12/2006	100,000	Common	$2,500	0.02	0	-	-
7/13/2006	500,000	Common	$10,000	0.02	0	-	-
7/18/2006	400,000	Common	$10,000	0.025	100,000	$0.05	7/18/2008
7/20/2006	500,000	Common	$15,000	0.03	0	-	-
Totals	2,280,000		$54,500		170,000

In addition, we issued stock to the following individuals and reduced the accounts payable accordingly:

None

During the second quarter of 2006, we granted the following stock options for our common stock to employees and consultants. All options listed below vested per the footnotes below.

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

EXHIBIT INDEX


Exhibit No.	Description

2.1	Agreement and Plan of Merger between Datameg Corp., a New York corporation ("Datameg NY"), and Datameg Corporation, a Delaware corporation, dated April 27, 2005.(1)

3.1	Certificate of Incorporation of Datameg Corporation, a Delaware corporation, dated April 27, 2005.(1)

3.2	Bylaws of Datameg Corporation, a Delaware corporation, effective as of April 27, 2005.(1)

5.1	Opinion of Duane Morris LLP as to legality of securities being registered.

10.1	Engagement Agreement between Datameg Corporation and 350 Group, LLC, dated April 28, 2005.(1)

10.2	Form of Convertible Promissory Notes issued in May and June 2004, together with table identifying issuance date, noteholder, amount and conversion price.(2)

10.3	Form of Subscription Agreement, Individual Investor Questionnaire, Sample Convertible Promissory Note and Sample Warrant for Common Stock.(3)

10.4	Joint Sales and Marketing Agreement, dated as of July 16, 2004, by and between North Electric Company and Tekno Telecom LLC.(4)

10.5	Exclusive Distribution Agreement, dated January 1, 2004, by and between North Electric Company, Inc. and International Network Technology, Ltd.(5)

10.6	Release dated as of April 1, 2005, by an among Datameg NY and Hickey Hill Partners, LLC.(6)

10.7	Subscription Agreement, dated March 5, 2004, by and between Datameg and Mei Chung Tang Lee.(2)

10.8	Consulting Agreement, dated as of August 6, 2004, by and between Datameg NY and Mark McGrath.(6) (*)

10.9	Option Agreement between Datameg NY and Mark McGrath, dated as of April 17, 2005.(1) (*)

10.10	Option Agreement between Datameg Corporation and Mark P. McGrath, dated as of July 25, 2005.(7) (*)

10.11	Management Consultant Agreement between William J. Mortimer and QoVox Corporation, dated July 18, 2005.(7) (*)

10.12	Restricted Stock Agreement between William J. Mortimer and Datameg Corporation, dated as of July 25, 2005.(7) (*)

10.13	Letter Agreement by and between Neil R. Gordon and Datameg Corporation dated September 22, 2005 (8) (*)

10.14	Option Agreement by and between Neil R. Gordon and Datameg Corporation dated September 22, 2005 (8) (*)

10.15	Employment Agreement between Dan Ference and QoVox Corporation, dated August 19, 2005.(3) (*)

10.16	Settlement Agreement and Mutual Release, dated as of February 12, 2004, by and between Datameg NY and Rex Hestor.(9) (*)

10.17	Option Agreement by and between Datameg NY and Rex Hestor, dated as of January 2004.(3) (*)

10.18	Stock Lock-up Agreement by and between Datameg NY and Rex Hestor, dated as of January 2004.(9) (*)


10.19	Letter Agreement by and between Joshua E. Davidson and Datameg Corporation, dated as of July 1, 2005.(10) (*)

10.20	Option Agreement between Datameg Corporation and Joshua E. Davidson, dated as of July 25, 2005.(7) (*)

10.21	Agreement dated as of March 22, 2005, by and between Datameg NY and Kanti Purohit.(6) (*)

10.22	Agreement and Settlement, dated as of March 22, 2005, by and between Datameg NY and Kanti Purohit.(6) (*)

10.23	Consulting Agreement, dated as of July 1, 2004, by and between Datameg NY and James Murphy.(4) (*)

10.24	Option Agreement, dated January 1, 2004, by and between Datameg NY and Andrew Benson.(9) (*)

10.25	Option Agreement between Datameg NY and Andrew Benson, dated April 17, 2005.(1) (*)

10.26	Mutual General Release between Andrew Benson and Datameg NY dated April 27, 2005.(1) (*)

10.27	Resignation by Andrew Benson from directorship of Datameg Corporation, a Delaware corporation, dated April 29, 2005.(1) (*)

10.28	Consulting Agreement between Datameg Corporation, a Delaware corporation, and Andrew Benson, dated as of May 1, 2005.(1) (*)

10.29	Resignation by William J. Mortimer as General Manager of QoVox, Inc.(11)

10.30	Appointment of James Murphy as its Chief Executive Officer, President and Chairman of the Board of Directors.(12)

10.31	Appointment of Lehman Bros. Managing Director John T. Grady Jr. to Board of Directors.(13)

10.32	Appointment of Bob Nelson as Vice President, Worldwide Sales, for QoVox.(14)

10.33	Appointment of Michael West as Senior Vice President, National Accounts, for QoVox.(15)

10.34	Benson And Gordon Compensation Amendments.(16)

10.35		Director Mark P. McGrath resignation. (17)

10.36		Investment banker Byron J. Collier appointed to the Advisory Board (18)

10.37		Director William J. Mortimer receives 2 million Datameg common shares, returns 10 million under RSA (19)

10.38		Benson Amendment And Utah Move (20)

10.39		Former Director and Chief Executive Mark P. McGrath canceled his option agreement for 10 million shares. (21)

10.40		Changes in Registrant’s Certifying Accountant (22)

21.1	Subsidiaries of the Registrant.(3)

99.1	Exhibit of Unregistered Sales of Securities.(7)

99.2	Press Release dated September 1, 2005.(3)

(1)	Incorporated by reference to the Current Report on Form 8-K filed by Datameg Corporation on May 4, 2005.

(2)	Incorporated by reference to the Form SB-2/A filed by Datameg NY on June 14, 2004.

(3)	Incorporated by reference to the Form SB-2 filed by Datameg Corporation on September 1, 2005.

(4)	Incorporated by reference to the Quarterly Report on Form 10-QSB/A filed by Datameg NY on November 26, 2004.

(5)	Incorporated by reference to the Annual Report on Form 10-KSB filed by Datameg NY on April 14, 2004.

(6)	Incorporated by reference to the Annual Report on Form 10-KSB/A filed by Datameg NY on April 20, 2005.

(7)	Incorporated by reference to the Quarterly Report on Form 10-QSB/A filed by Datameg Corporation on August 29, 2005.

(8)	Incorporated by reference to the Current Report on Form 8-K filed by Datameg Corporation on September 22, 2005.

(9)	Incorporated by reference to the Form SB-2/A filed by Datameg NY on February 27, 2004.

(10)	Incorporated by reference to the Current Report on Form 8-K filed by Datameg Corporation on July 26, 2005.
(11)	Incorporated by reference to the Current Report on Form 8-K filed by Datameg Corporation on December 14, 2005.
(12)	Incorporated by reference to the Current Report on Form 8-K filed by Datameg Corporation on January 17, 2006.
(13)	Incorporated by reference to the Current Report on Form 8-K filed by Datameg Corporation on February 23, 2006.
(14)	Incorporated by reference to the Current Report on Form 8-K filed by Datameg Corporation on March 1, 2006.
(15)	Incorporated by reference to the Current Report on Form 8-K filed by Datameg Corporation on March 14, 2006.
(16)	Incorporated by reference to the Current Report on Form 8-K filed by Datameg Corporation on April 20, 2006

(17)	Incorporated by reference to the Current Report on Form 8-K filed by Datameg Corporation on June 7, 2006
(18)	Incorporated by reference to the Current Report on Form 8-K filed by Datameg Corporation on July 12, 2006
(19)	Incorporated by reference to the Current Report on Form 8-K filed by Datameg Corporation on July 14, 2006
(20)	Incorporated by reference to the Current Report on Form 8-K filed by Datameg Corporation on July 31, 2006
(21)	Incorporated by reference to the Current Report on Form 8-K filed by Datameg Corporation on August 4, 2006
(22)	Incorporated by reference to the Current Report on Form 8-K filed by Datameg Corporation on August 7, 2006
(*)	Management contract or compensatory plan.

Exhibits (attached) to Form 10-QSB

31.1 Certification of the Principal Executive Officer and the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of the Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:		/s/ JAMES MURPHY
		James Murphy, Chief Executive Officer
Date:		August 31 ,2007

Exhibit 31.1

PRINCIPAL EXECUTIVE OFFICER

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, James Murphy, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Datameg Corporation for the three months ended June 30, 2006;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this quarterly report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this quarterly report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

d) disclosed in this quarterly report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

By:	/s/ JAMES MURPHY
	James Murphy
	Chairman and Chief Executive Officer
	August 31, 2007

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of Datameg Corporation, a Delaware corporation (the "Company"), on Form 10-QSB for the three months ending June 30, 2006, as filed with the Securities and Exchange Commission (the "Report"), I, James Murphy, Chairman and Principal Financial Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

By:		/s/ JAMES MURPHY
		James Murphy
		Chief Executive Officer
		August 31, 2007

End of Filing