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<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
Commission File No.
0-2532
FIFTH DIMENSION INC.
-----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
New Jersey 21-0717490
- ------------------------------- ----------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
801 New York Avenue, Trenton, New Jersey 08638
- -------------------------------------------------------------------------------
(Address of Principal Executive Office) (Zip Code)
Issuer's Telephone Number, Including Area Code - (609) 393-8350
--------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
As of September 30, 1997 the Registrant had outstanding 1,093,636 shares of
Common Stock $.33 1/3 par value.
<PAGE>
FIFTH DIMENSION INC.
--------------------
TABLE OF CONTENTS
-----------------
PERIOD ENDED SEPTEMBER 30, 1997
-------------------------------
PAGE
----
PART 1 - FINANCIAL INFORMATION
- ------------------------------
Item 1 - Financial Statements
- ------------------------------
Balance Sheet 1
Statement of Operations and Retained Earnings 2
Statement of Cash Flows 3
Notes to Financial Statements 4
Item 2 - Management's Discussion and Analysis of
- ------------------------------------------------
Financial Condition and Results of Operations 5
---------------------------------------------
<PAGE>
FIFTH DIMENSION INC.
--------------------
BALANCE SHEET
-------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
SEPTEMBER 30
1997
------------
<S> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 85,823
Accounts Receivable - Net 190,844
Inventories 885,523
Prepaid Expenses 44,784
----------
Total Current Assets 1,206,974
----------
PROPERTY, PLANT AND EQUIPMENT - Net of Accumulated
Depreciation 546,234
----------
PATENT COSTS, LESS ACCUMULATED AMORTIZATION 10,323
----------
DEFERRED INCOME TAX BENEFITS 473,875
----------
TOTAL ASSETS $2,237,406
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes Payable - Current Portion $ 786,182
Accounts Payable 267,833
Accrued Expenses 96,719
Accrued Compensation and Vacation 122,785
----------
Total Current Liabilities 1,273,519
----------
LONG TERM LIABILITIES:
Notes Payable - Long Term Portion 1,683
----------
TOTAL LIABILITIES 1,275,202
----------
STOCKHOLDERS' EQUITY:
Common Stock - ($.33 1/3 Par Value) 364,936
Additional Paid-In Capital 403,663
Treasury Stock - At Cost (604)
Retained Earnings 194,209
----------
TOTAL STOCKHOLDERS' EQUITY 962,204
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,237,406
----------
</TABLE>
-1-
<PAGE>
FIFTH DIMENSION INC.
--------------------
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
---------------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
QUARTER NINE MONTHS QUARTER NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
---------------------------- -----------------------------
<S> <C> <C> <C> <C>
NET SALES $ 267,845 $ 1,023,250 $1,003,333 $3,731,988
COST OF SALES 411,580 1,587,030 716,022 2,567,679
---------- ----------- ---------- ----------
GROSS PROFIT (LOSS) ON SALES (143,735) (563,780) 287,311 1,164,309
OPERATING EXPENSES 234,705 666,862 321,283 935,539
INTEREST EXPENSE 15,896 30,528 2,496 10,035
---------- ----------- ---------- ----------
OPERATING INCOME (LOSS) (394,336) (1,261,170) (36,468) 218,735
OTHER INCOME (EXPENSE) 6,105 44,994 3,934 10,919
---------- ----------- ---------- ----------
INCOME (LOSS) BEFORE TAXES (388,231) (1,216,176) (32,534) 229,654
PROVISION FOR INCOME TAXES (BENEFIT) (151,215) (473,700) (11,483) 81,054
---------- ----------- ---------- ----------
NET INCOME (LOSS) (237,016) (742,476) (21,051) 148,600
RETAINED EARNINGS AT BEGINNING
OF PERIOD 431,225 936,685 1,250,502 1,080,851
---------- ----------- ---------- ----------
RETAINED EARNINGS AT END OF PERIOD $ 194,209 $ 194,209 $1,229,451 $1,229,451
---------- ----------- ---------- ----------
NET INCOME (LOSS) PER COMMON SHARE $ (.22) $ (.68) .02 .14
---------- ----------- ---------- ----------
WEIGHTED AVERAGE OF COMMON
SHARES OUTSTANDING $1,093,636 1,093,636 1,093,636 1,093,636
---------- ----------- ---------- ----------
</TABLE>
-2-
<PAGE>
FIFTH DIMENSION, INC.
---------------------
STATEMENT OF CASH FLOWS
-----------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
1997 1996
------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net Income (Loss) $(742,476) $ 148,600
--------- ---------
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET
- -------------------------------------------------
CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
- ----------------------------------------------
Depreciation Expense 86,850 88,529
(Increase) Decrease in Accounts Receivable 36,560 22,857
(Increase) Decrease in Inventory 17,451 160,693
(Increase) Decrease in Prepaid Expenses and Taxes (3,979) 15,501
Increase (Decrease) in Accounts Payable 132,660 30,859
Increase (Decrease) in Accrued Expenses and Compensation 39,233 (19,716)
Increase (Decrease) in Accrued/Deferred Income Taxes (473,875) 80,929
--------- ---------
(165,100) 379,652
--------- ---------
Net Cash Provided (Used) by Operating Activities (907,576) 528,252
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Capital Expenditures (7,910) (120,025)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Proceeds from Loans 722,910 -
Reduction in Notes Payable (18,378) (212,500)
--------- ---------
Net Cash Provided (Used) by Financing Activities 704,532 (212,500)
-------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (210,954) 195,727
- ----------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 296,777 141,013
- ------------------------------------------------ --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 85,823 $ 336,740
- ------------------------------------------ --------- ---------
</TABLE>
-3-
<PAGE>
FIFTH DIMENSION INC.
--------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
SEPTEMBER 30, 1997
------------------
NOTE #1 INVENTORIES
-----------
On an interim basis, the cost of goods sold and resulting inventory valuation
is calculated using the gross profit method. A physical inventory is taken
December 31 of each year and a distribution into raw materials, work in
process and finished goods is only available at that time.
-4-
<PAGE>
FIFTH DIMENSION INC.
--------------------
PERIOD ENDED SEPTEMBER 30, 1997
-------------------------------
PART 1 - ITEM 2
- ---------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- --------------------------------------------------------------------------
OPERATIONS
----------
The Registrant reported net losses of $237,016 and $742,476 for the third
quarter and first nine months of 1997 on sales revenue of $267,845 and
$1,023,250, respectively. This compares with a 1996 quarterly net loss of
$21,051 on sales revenue of $1,003,333 and a 1996 nine month net income of
$148,600 on sales revenue of $3,731,988. The significant decline in operating
income and revenues is primarily a result of production delays and decreasing
contract requirements on the Kearfott slip ring contract and production delays
on the ACALA Tank Turret slip ring contract. Gross profit was adversely impacted
by these production delays and low margins on products shipped during the
current periods. Despite significant overhead reductions, the depressed sales
levels and gross profit margins did not provide adequate coverage of
manufacturing overhead. This lack of overhead coverage thus resulted in the
reported gross profit deficits. The Registrant reduced operating expenses by 29%
over the first nine months of 1997 versus the similar period in 1996. This
reduction was primarily the result of lower personnel costs although various
other overheads were reduced in response to the lower sales and production
levels. Interest costs were higher during the current periods as a result of
increases in outstanding debt balances. Income tax benefits were accrued based
on the projected tax reductions anticipated to result in future periods from
carryover of the current operating losses.
The financial condition of the Registrant has declined during 1997 as result
of the operating losses. This is evidenced by the $1,165,000 decline in working
capital during this time period. The Registrant borrowed $230,000 during the
third quarter and $715,000 over the first nine months of 1997 from bank sources
and the Registrants' officers and directors. The Registrants' line of credit was
not renewed by its primary bank effective May 1, 1997. The company is currently
past due on the repayment of the line of credit ($400,000) and an installment
loan ($66,665) with the same bank. As originally reported in the Registrant's
IO-QSB dated March 31, 1997 and subsequent form 8K filings, the Registrant is
pursuing alternative financing in order to address working capital requirements
and the delinquent loan balances. As of September 30, 1997, alternative short
term financing of $315,000 has been secured which includes $115,000 borrowed
from the company directors and officers and $200,000 borrowed from another bank,
with the guarantee of a major company stockholder. The company anticipates
continuing financing requirements until inventory reductions can support current
cash needs. Additional financing is under review and will be required in order
for the Registrant to meet its cash requirements. In the event that the
Registrant is unsuccessful in its attempt to obtain financing, it could result
in the inability to meet its current financial obligations. Continued operating
deficits are projected for the fourth quarter of 1997 although at lower levels
than experienced during the first nine months. Shipments on the Kearfott and
ACALA slip ring contracts are expected to resume during the fourth quarter of
1997 and be completed during the first half of 1998. The ability of the company
to return to profitable operating levels in the future is dependent on the
success of the new products that have resulted from the Applied Research
Programs; namely the Brushless Slip Ring and the Mercury Free Switch. Both
products are in the patent application stage with early positive customer
reaction. The company has received an order from Draper Laboratories for the
Brushless Slip Ring with significant production potential, if testing is
positive. In addition, the company has received and are bidding to large
customers other potentially significant contracts for future years.
No other changes have occurred which would have a material effect on the
liquidity, financial condition or results of operations of the Registrant.
-5-
<PAGE>
FIFTH DIMENSION INC.
--------------------
SIGNATURES
----------
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FIFTH DIMENSION INC.
- --------------------
(Registrant)
DATE BY
-------------------------------- -------------------------------
Craig Ebner
President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET DATED SEPTEMBER 30, 1997, FIFTH DIMENSION INC. STATEMENTS OF OPERATIONS
FOR THE QUARTER ENDED SEPTEMBER 30, 1997 AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1997, FIFTH DIMENSION INC. STATEMENTS OF CASH FLOWS FOR THE
THE NINE MONTHS ENDED SEPTEMBER 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 85,823
<SECURITIES> 364,936
<RECEIVABLES> 190,844
<ALLOWANCES> 0
<INVENTORY> 885,523
<CURRENT-ASSETS> 1,206,974
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,237,406
<CURRENT-LIABILITIES> 1,273,519
<BONDS> 0
0
0
<COMMON> 364,936
<OTHER-SE> 962,204
<TOTAL-LIABILITY-AND-EQUITY> 2,237,406
<SALES> 267,845
<TOTAL-REVENUES> 273,950
<CGS> 411,580
<TOTAL-COSTS> 234,705
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,896
<INCOME-PRETAX> (388,231)
<INCOME-TAX> (151,215)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (237,016)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)
</TABLE>
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